Asian markets are set to open on the back foot this morning as the tensions between the US and China increase. The US ambassador to China has been summoned to explain the arrest of Huawei CFO Meng Wanzhou and China has advised that it would take ‘further action’ if it deems it necessary. FX markets experienced a bit of gapping to the downside in risk pairs this morning after the story hit the wires adding to already negative sentiment that pervaded from weak US jobs data on Friday and poor Chinese growth data over the weekend.
Geo-Political issues once again look set to influence markets this week when traditionally traders expect a slow down as we head into Christmas market trading conditions. The Sino-US trade situation seems to be increasing the likelihood of further volatility and UK markets are bracing themselves for sharp, aggressive moves in the pound with the key Brexit vote now just four trading sessions away. Things are not looking positive for PM Theresa May at the moment and a plethora of outcomes from Tuesday result, including the possibility of a second referendum, leadership change, a general election or the deal actually being agreed has sterling traders preparing for a lively week ahead.
Sentiment is once again expected to dominate direction as we move through today’s trading sessions and traders will be keeping a close eye on news wires for any changes in the current situation on a variety of issues. There’s little in the way of fundamental date releases in the Asian session and the same can be said of the New York session later in the day. We do have some tier 1 data due out of the UK in the middle of the trading day in the form of the monthly GDP and Manufacturing numbers, however expect these to have little affect on the markets, unless wildly out of expectation, as the Brexit situation continues to dominate investor sentiment in UK products.