US-China trade meeting volatility
Several different moving parts can be seen in the overnight session, though with the limelight on the US-China trade meeting that saw positive developments, Asia markets can be seen lifted into Friday.
Awaiting the meeting conclusions
Following the whipsawing of markets thus far, the next 24 to 36 hours may well continue with further volatility surrounding the key event risk of US-China trade talks. President Donald Trump notably highlighted to markets that talks had gone ‘very well’ and will continue into Friday, against earlier fears that talks would end early. Moreover, perhaps a sign of progress as seen from past trade talks in Washington, the US President will also be convening with top negotiators on Friday, fuelling positive sentiment for a constructive conclusion.
Risk assets can be seen gaining favour with this development, while the short USD/JPY trade may take a pause on a short-term boost from this positive turn. Prices was seen breaking past the resistance at around $107.50 and last seen waffling around $107.90 levels as momentum picks up. While the longer-term bias remains on further yen strength on the back of various other issues including a global growth slowdown, the potential for a breakthrough here could mean short-term volatility as told above. USD/CNH likewise a touch lower with the plausibility of a currency pact being enveloped in some form of a deal. This pair may perhaps be the key one to watch to reflect the trade meeting outcome. As it is, prices can be seen hanging just above support at around $7.10 levels and a break lower here, supported by a bearish bias on the MACD, could see to further downsides to the $7.0 level. Needless to say, all eyes will be on the concluding remarks with regards to the US-China meeting from both sides.
US CPI disappointment fuel Fed cut expectations
Notably, alongside the boost to risk sentiment from comments on the US-China trade meeting, the US CPI disappointment can be seen keeping a hold on Fed cut expectations. September’s core CPI arrived at 0.1% month-on-month, missing the 0.2% consensus and down from the 0.3% reading previously. This adds to a string of indications compelling the Fed to issue another insurance cut, an idea that Fed Powell appeared to have little pushback against this week. A decline attributed to car prices here is evidently not a good sign for the US economy as a reflection of consumer spending.
The US dollar index, measured against six major currencies, edged down to a 2-week low, trading around 98.70 levels into Friday morning in Asia. Prices looks to be on the way to form a lower low and perhaps one to mark a short-term down move here, one to watch.
The US-China trade fuelled optimism will be the key driver for Asia markets as we await the resumption of Friday’s talks. Little are expected out of the Asia session that may derail the glow though keeping an eye on any further comments on the talks. The latter half of the day would find Singapore’s August retail sales reading ahead of Germany’s September inflation reading to watch. Notably, Monday would have Singapore’s semi-annual monetary policy meeting statement expected alongside the advance Q3 GDP estimates for the local market to watch. Once again, with the SGD that had clawed back some strength into October, watch for reactions in relation to an expected ease by the Monetary Authority of Singapore through the lowering of the SGDNEER slope.
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