Forex and Financial Markets : Headlines
U.S. stock futures and Asian shares tumbled on Thursday after Canadian authorities arrested a top executive of Chinese tech giant Huawei for extradition to the United States, fanning fears of a fresh flareup in tensions between the two superpowers.
The news came as Washington and Beijing begin three months of negotiations aimed at de-escalating their bruising trade war, which is adding to global investors’ worries over rising U.S. interest rates and other risks to global economic growth.
Markets had initially brightened after U.S. and Chinese leaders agreed a temporary trade truce at a meeting on Saturday. But the mood has quickly soured on scepticism that the two sides can reach a substantive deal on a host of highly divisive issues within the tight 90-day timeframe set out.
The benchmark Treasury 10-year yield ) fell 1.7 basis points to 2.906 %, near Tuesday’s three-month low of 2.885 %. U.S. markets were closed on Wednesday to mark the death of former President George H.W. Bush.
The yield curve remained inverted between two and five year zones, with five-year notes yielding 2.782 % below 2.795 % on two-year notes
As a result, the safe-haven assets got a boost at the expense of the risk-assets took, with the Aussie hit the hardest amid a sharp drop in the Australian trade surplus. The Kiwi followed suit as a sell-off in the Asian equities and oil prices added to the weight on the prices. The Yen, on the other hand, outperformed that pulled the USD/JPY pair back towards the 112.50 level while gold prices on Comex consolidated in multi-week tops below the 1250 upside barrier. Meanwhile, the US dollar traded broadly subdued, pressured by the inversion of the Treasury yields.
Main Topics in Asia
Australian Trade Balance misses, declines sharply to $2.316 billion on Imports upswing
CBI: UK facing exetreme risks in disorderly Brexit – Reuters
BoJ’s Kuroda: BoJ must communicate its exit strategy but only when it hits the price target
BoJ’s Kuroda: No specific upper limit for bond purchases
Brent oil Technical Analysis: This MA line is capping the recovery rally ahead of OPEC meeting
Fed’s Quarles: Comfortable that level of financial risk is ‘moderate’
Moody’s: The outlook for Australia’s infrastructure sector is stable next year
Gold consolidates near 5.5-week highs amid US yield curve inversion
Adviser: PBOC to allow Yuan to gain in trade truce – MNI
Iran’s OilMin Zanganeh: Iran looking for exemption from any oil output cuts
Key Focus Ahead
We have a data-quiet European calendar, with the only German factory orders dropping in at 0700 GMT. Hence, the focus remains on the Brexit developments, as the debate for the Parliamentary vote on the Brexit deal gets started later on today. Also, the outcome of the much-awaited OPEC meeting due to be announced at 1200 GMT will have a major impact on the oil markets and eventually on the broader market sentiment, as US-China trade woes continue to undermine.
In contrast, the NA session remains quite eventful, with a host of economic releases due on the cards from the US docket, including the ADP jobs report at 1315 GMT that will be followed by the weekly jobless claims and trade data at 1330 GMT. At the same time, the Canadian trade figures will be out just ahead of the speech by BOC Governor Poloz at 1350 GMT. Later on 1500 GMT, the US ISM services PMI will be reported alongside the factory orders data and Canadian Ivey PMI. Thereafter, the oil markets will watch out for the EIA crude stocks data at 1530 GMT.
Besides, the following central bankers speeches will also remain in focus for further trading impetus.
0905 GMT: RBA Assistant Governor Debelle
1350 GMT: BOC Governor Poloz
Around 1500 GMT: Fed Chair Powell
1715 GMT: FOMC member Bostic
EUR/USD: Focus on yield differentials
Italy-German 10-year yield spread has narrowed to 279 basis points – the lowest level since Oct. 4. So far, however, that has not put a bid under the EUR, possibly due to fears of economic recession stemming from the Treasury yield curve inversion.
GBP/USD floundering near 1.2700 as the Brexit clock continues to tick down
Thursday remains clear of any GBP-related data, and the GBP/USD pairing remains trapped in tense markets ahead of the December 11th Brexit cut-off.
GBP to fall nearly 3% if parliament rejects Brexit deal – Reuters poll
According to the results of the latest Reuters poll of economists, a majority of them believe that the British currency, the GBP, is poised for a 2.75% fall should the parliament reject the Brexit deal.
OPEC Dec 6th Vienna meeting preview: Agenda and timings
The much-awaited meeting of the Organisation of Petroleum Exporting Countries (OPEC) is due on the cards later today that will have a significant impact on the oil price-action in the coming months.
ADP employment preview: job creation expected to remain healthy
American employers are thought to have maintained their strong recruitment in November with 195,000 new positions on the books at the payroll processing giant ADP.
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