Comments from US leaders over the weekend have increased uncertainty in global markets with regard to the ongoing trade situation between China and the US leading to pressure on markets this morning on the Asian open. For the first time ever, leaders were unable to come to an agreement on a formal written declaration at the end of the APEC summit and reports indicate that this stems from a major disagreement between the US and China with regard to the WTO. Certainly speeches from both Chinese President Xi and US Vice President Pence didn’t hold back on criticising each countries policies and it now looks increasing unlikely that the G20 meeting later this month will yield much progress between the two super powers.
Markets are now poised for more moves to the downside after seeing some decent rallies in ‘risk on’ trades and overall sentiment over the last week, traders will be carefully monitoring the news wires for the next catalyst as the week goes on. The Aussie dollar has dropped in early trading but so far there’s been no real clear outs of risk on moves, however if the situation is seen to escalate then expect stronger moves to hit the markets. The Brexit situation in the UK seems poised on a knife edge at the moment and sterling’s prospects are joining it there. We’re due for further volatility in the pound this week and it feels like it really is a 50/50 call as the whether PM May survives along with her proposal or whether we see a drastic change of direction.
This week’s trading flows look set to be dominated once again by investor sentiment as there is very little in the way of fundamental data due to be released. Also, the US Thanksgiving day holiday on Thursday generally leads to lower liquidity conditions and given the current market situation we could experience some sharp moves across the currencies and other products as the week progresses. Today there is nothing in the way of tier 1 data due for release but Eurogroup meetings are taking place in Brussels so expect some comments to come from them.