Trading news

USD reverses as traders doubt “Trumpflation”

- Overall sentiment remains cautious and investors are taking a wait-and-see approach

- With event risks such as US payroll report and Italian referendum scheduled for the end of the week we should see contained trading

- USD was weaker across the board as traders reconsidered their “Trumpflation” trade

- Crude oil may continue to come under selling pressure as skepticism over an OPEC-led agreement with major producers increases

- Failure to build a meaningfully output cut will further weigh on US stocks

- Gold finally has some selling pressure relief, rallying to $1194 but the bounce feels more about profit taking than sentiment shift

 

Asian markets were subdued but in general slightly higher following modest gains on Wall Street on Friday. The Nikkei fell -0.15% on the back of a stronger JPY against the USD (1.24%), while the Hang Seng rose 0.90% and Shanghai composite increased 0.46%. Yet overall, the sentiment remains cautious and investors are taking a wait-and-see approach. The USD was weaker across the board as traders reconsidered their “Trumpflation” trade. 

 

Crude oil continues to come under selling pressure as skepticism over an OPEC-led agreement with major producers increased. Reuters reported that Saudi Arabia will not participate in a summit among OPEC and non-OPEC producers on Monday. Failure to build a meaningfully output cut will further weigh on US stocks. WTI front month slipped to $45.14, capping at nearly 5% from last week. 

 

In the EMs, FX with US yields is retracting, while pressure on high yielding currencies was reduced. Gold finally has some selling pressure relief, rallying to $1194, but the bounce feels more about profit-taking than a sentiment shift. 

 

In China, data released indicated that profit growth in the industrial sectors increased to 9.8% y/y from 7.7% in October, supported by better sales and stronger prices, further evidence that the economy continues to stabilize. 

 

In France, Francois Fillon convincingly won the republican primary on Sunday (beating Juppé 66-34%) making him the favorite to win a presidential election against the divided left and the marginally popular right. 

 

In the US, the World Trade Organization is expected to rule that Boeing was provided subsidies illegally for it long range plane. It will be very interesting to see how President-elect Trump will react, given his negative comments towards the WTO and his pro-protectionist stance.

 

The Economic calendar today remains light with ECB President Mario Draghi expected to appear before the European Parliament to answer questions about the post-Brexit economy. With event risks such as the US payroll report and Italian referendum scheduled for the end of this week, we should see contained trading prior. Oil and energy related trades will be in focus as OPEC holds further talks in Vienna with non-members, including Russia regarding the effect to curb global supply glut. In the US, Dallas Fed manufacturing is expected to rise 1.5 from a prior read of -1.5%.

Monday, 28 Nov, 2016 / 9:56

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