Investors are again focused on the US-Chinese trade negotiations. Today, Reuters, citing its own sources, reported that increased US tariffs remained the main issue of a limited trade deal. Chinese representatives insist that the US administration cancel the increase in tariffs on the PRC exports planned for December 15 in the amount of USD 156 billion. Beijing also wants the United States to cancel tariffs already imposed on Chinese products on September 1. US officials said that the place of the deal has not yet been determined, but it may take place this month. We also note that the head of the Minneapolis FRB, Neel Kashkari, said that the Fed should not again raise interest rates until inflation accelerates and reaches 2.0%. The US currency is strengthening today against the euro and the yen but is weakening against the pound.
During the day, investors are waiting for the publication of the October data on the ISM non-manufacturing business activity index in the US. The indicator is expected to grow from 52.6 to 53.5 points, which will strengthen the dollar.
Today, oil quotes are growing again. Pric s are supported by investors’ hopes for signing an American-Chinese limited trade deal this month, often hinted at by the US and PRC officials, as well as a potential exacerbation of tensions in the Middle East related to the Iranian nuclear program. Today, Iranian President Hassan Rouhani said that the Islamic Republic will begin injecting uranium gas in centrifuges, which is another step towards the country’s withdrawal from the nuclear deal. In addition, OPEC slightly lowered its long-term forecast for oil demand. According to cartel experts, by 2024 demand will amount to 104.8 million barrels per day, and by 2040 – to 110.6 million. In the evening, investors are waiting for the weekly API report on the US crude oil reserves. The last time they declined by 708K barrels. The continuation of this trend may support prices.
Today, the euro strengthens against the yen but is weakening against the pound and the dollar.
In the absence of important macroeconomic releases, the movement of the euro is of technical nature. Investors are watching the continuation of negotiations between China and the United States on a limited trade deal. The September and December increases in US tariffs on Chinese exports remain a stumbling block. Beijing considers their cancellation or mitigation a prerequisite for the conclusion of a trade agreement, which may occur in November. Also, investors reacted positively to today’s statements by President Xi Jinping, who called for resolving international disputes through negotiations, as well as removing global trade barriers.
GBP is strengthening today against its main competitors – EUR, USD, and JPY.
Investors are focused on the publication of October data on the Services PMI, which dominates the UK economy. The indicator rose from 49.5 to 50.0 points and was at the border of the stagnation and growth zones. Despite the fact that the increase in the index exceeded investors’ expectations, experts note that the British services sector is still weak due to uncertainty with Brexit. For example, the number of new, including international, contracts is decreasing, which has led to a reduction in the number of employees in the sector.
The Japanese yen is weakening today against its main competitors – the euro, the pound, and the US dollar.
Today, investors are focused on the comments of the head of the Bank of Japan, Haruhiko Kuroda. He said that further easing of monetary policy by the central bank would not be limited to lower interest rates, as there are other mitigation measures, including fiscal ones. Kuroda also said that, in his opinion, the state of the Japanese economy will remain good, despite the recent increase in the consumption tax. We should also note that investors’ hopes for the speedy conclusion of a trade deal between the United States and China continue to exert pressure on the yen. Against this background, investors get rid of the yen as a “safe haven”.
AUD is weakening today against its main competitors – GBP, USD, JPY, and EUR.
Today, investors are focusing on the outcome of the meeting of the Reserve Bank of Australia. The regulator left the interest rate at 0.75%, as expected. RBA head Philip Lowe noted that the period of low interest rates in the Australian economy will be long, while the bank is ready to further mitigate monetary policy if necessary. The RBA also lowered its forecast for GDP growth from 2.50% to 2.25% this year, but left the growth forecast for 2021 unchanged at 3.0%.