Asian stocks are trading lower, despite their US counterparts touching new intraday record highs, as investors continue to look for signs of progress in the highly anticipated US-China trade deal. US President Donald Trump teased markets saying that a US-China trade deal could happen “soon”, even as he repeated his threats to raise tariffs if a deal does not materialise. Risk aversion appears to be creeping back into markets, allowing safe haven assets to trim their month-to-date losses. Gold has breached $1460 while USDJPY is trading around the 109.0 level at the time of writing.
Powell’s speech, US data unlikely to trigger sharp moves in DXY
Considering that President Donald Trump’s latest speech offered no new clues surrounding the US-China trade deal, the Dollar will now turn its immediate attention to the incoming US economic data, as well as Fed chair Jerome Powell’s testimony before Congress. Powell is expected to reiterate that US monetary policy is currently in a “good place”, with markets expecting the Fed to stand pat on US interest rates at least through the first half of 2020. However, should Powell make what is perceived to be a dovish comment, that could prompt some immediate softness in the Dollar.
The upcoming release of the October US CPI and retail sales data should support the narrative that the FOMC will leave its policy settings unchanged over the coming months. With inflation subdued and consumers still keeping economic growth momentum intact, the US economy is expected to continue its outperformance over its peers, which should sustain the DXY’s resilience above 98.
Brent stumbles on uncertain US-China trade deal prospects
Brent futures have retreated below $62/bbl, as markets await fresh signals surrounding the US-China trade talks. With the next OPEC+ meeting just weeks away, it appears that the alliance is pinning their hopes squarely on a trade deal to send Oil prices higher, rather than triggering deeper supply cuts. An official trade deal would offer a reprieve to the near-term outlook on global demand, while giving confidence to Oil bulls going into 2020.