The US-China trade relations and the ongoing Brexit saga remain the two key themes at the end of the week, providing the catalysts for currencies and equities. The Dollar is seeing some weakness across the board on the back of the news that President Trump and Chinese President Xi will not meet this month to agree on trade terms. The Pound is broadly holding on its gains as Brexit will likely be delayed in an attempt to reach some common ground. Gold lost traction as it attempted to overcome the $1,304 mark but Oil steams ahead.
The Dollar is seeing a mixed performance following important developments on the geopolitical arena. One the one hand, Trump and Xi will not meet this month to conclude their trade discussions and sign a treaty, prolonging the tariffs' duration on both sides. North Korea is also becoming an issue again as traction in the denuclearization talks seems to be lost and the Asian nation is now considering whether “to keep talking with the US”. Against this backdrop, Dollar/Yen seems to have peaked at the 112 level and if we don't see any changes on the above fronts, then more risk-off flows will force prices to trend to the downside.
The British Pound is holding on its recent gains and is poised for its best week against the greenback since January this year. The Parliament voted to request a delay in the Article 50's deadline and now it's the EU side's turn to agree to an extension, which will allow further talks to be held. However, what seems to have prevented a further rally higher at this stage is the rejection of a motion for a second referendum. In any case, prices continue to trade around 1.32 and given the weakness seen in the Dollar and the positive bias behind Sterling, we may see a penetration of this key resistance soon and an attempt to target 1.35 in the medium term.
The Euro is looking to extend its move higher on the back of the lackluster performance from the Dollar's side and prices continue to oscillate above the 1.13 mark. The Eurozone inflation data is pending for release but investors are more likely to focus on the geopolitical developments, especially given the bearish bias communicated from the ECB. The shared currency's direction has hinged more on the Dollar's price action and if this remains the case, then more gains could be seen in the short term: if prices clear the 1.1340 mark, then the 1.1370 and 1.14 areas will be the next stops.
Gold bulls tried their luck above the $1,304 resistance and were above to extend the move until the $1,310 area, before a reversal took Gold lower again. This morning, another attempt is taking place with prices again attempting to overcome the $1,304 level, and it will be interesting to see how it unfolds: the Dollar is seeing reduced demand and the concurrent lack of progress on the Chinese and North Korean fronts seems to build a bullish case for the yellow metal with the $1,315 and $1,325 levels the next areas of interest. Oil continues to travel higher, and if it manages to settle above the $58 mark over the next couple of sessions, $60 is the next target.
MARKET EVENTS TO WATCH
- Euro-Zone Consumer Price Index - 2pm
- University of Michigan Sentiment - 6pm
- Baker Hughes U.S. Rig Count - 9pm
All times are GMT +4.