Last week showed decoupling between US equities (boosted by optimism on the Trade War front) and AsiaPac equities (lower on HK unrest). However, no safe-haven flows were seen just yet. With no developments over the weekend, the markets will likely pick up from where they left off on Friday.
Themes for the Week:
- Trade War: any headlined and developments on the trade war front will take center stage in an otherwise calm week. While equity markets are latching onto any positive headline, the mixed messages from the White House, the mood changes of the US president and the shifting demands from Chinese officials have created an air of uncertainty. With equities sky high, the sensitive side is the downside, if we get negative headlines.
- GBP Sentiment: finally it seems that the Pound is becoming tradable again. From what I’m reading, it seems that so long as Johnson continues to hold his lead in the polls, the Pound will continue it’s ascent as traders believe a clear win by the Conservatives should ensure the passage of Johnson’s Brexit deal and end the uncertainty that has plagued the GBP over the past few years.
- Hong Kong: the US Senate could pass the Hong Kong Human Rights and Democracy Act this week that would review Hong Kong’s special status annually. Thus far, Trump has demonstrated no tangible support for Hong Kong’s protestors but if Trump decides to back the bill, it would be seen by China as interference in internal affairs and would potentially imperil trade cooperation.
Data in the Week Ahead:
- RBA Minutes
- CAD CPI
- FOMC Minutes
- ECB Minutes
- BOC’s Poloz Speaks
- ECB’S Lagarde Speaks
- EU PMIs
- CAD Retail Sales
On the Radar:
Going into the week, the most evident trade (as it has been for a few weeks now) remains long US equities and EU equities. The recent downside action in AUDNZD may also continue, and small GBP longs vs. Jpy, Eur and Aud may be in favour. Finally, keep an eye on Crude, attempting another break upwards.
About the Author
Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals and Education from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.