Tensions with China lift buck as equities fall

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Tensions with China lift buck as equities fall

NOVEMBER 20, 2019

The U.S. Dollar is up against most majors across the board with the Japanese Yen being the exception as, once again, the fear of no progress towards a trade deal between the U.S. and China is hitting global markets, especially bond yields.

Overview

Indeed, the safe-haven status seems to be back because the U.S. Senate passed legislation supporting Hong Kong protesters who have been involved in the violence that has affected markets negatively. Additionally, it adds a diplomatic blow to negotiations since China is trying to subdue the rise of separatist sentiment in Hong Kong.

The greenback improved the most against the Canadian Dollar and the Mexican Peso and the Nordic Norwegian Krone as well as Swedish Krona. The Fed Minutes at 2 PM later today will likely reveal a central bank with some division in the policy stance and concerned over the lack of growth in both inflation and wages. Since trade is the top topic at the moment, any statements regarding it are what will move the needle.

What to Watch Today…

  • Fed Minutes 2 PM

Complete Economic Calendar can be found here.

EUR

The Euro falling slightly has also dragged the rest of the continent’s tender since threats to global growth are failing to fully go away. German productivity is interconnected with Nordic output, thus the reason why the news of a potential escalation in the U.S.-China trade dispute can reduce value so quickly. Bonds offer already low yields and it looks like the buck remains the go-to item for now. It is difficult to predict what type of retaliation China will attempt, but the situation benefits the greenback only.

GBP

The British Pound took a bit of a tumble following a televised political debate between the main leaders of the main parties campaigning ahead of the December 12th election: Labour Party’s Jeremy Corbyn and incumbent Prime Minister and leader of the Tories Boris Johnson. After a YouGov poll post-debate, results showed a perception that the discussion overall ended in a draw.

As the country remains polarized, the economy continues to await a solution to three years of austerity from the private sector, which has already shifted operations and business overseas. We do not think Brexit will happen as intended and that a deal or resolution in the next three months will propel Sterling higher.  

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