Asian stocks opened on a positive note after US stocks ended higher, as investors were offered hints of thawing global trade tensions. US President Donald Trump said that a US-China trade deal is getting “closer and closer”, while the US and Japan signed a limited trade agreement involving USD$7.2 billion in US agricultural goods.
Global trade tensions continue to be the primary driver over market sentiment, with risk appetite seizing any opportunity to push higher. Gold prices shed nearly two percent towards the $1500 level before edging back higher, the Japanese Yen weakened past 107.8 versus the Dollar before pulling back, while 10-year US Treasury yields have climbed back above the psychologically-important 1.70 level.
The recent nuances in the US-China trade conflict are shaping market expectations leading up to the high-level trade talks in early October. Although investors are displaying risk-on behaviour today, market sentiment remains fragile and ultra-sensitive to any development around the US-China trade conflict. Considering the fact that a rapid deterioration in US-China relations is not without precedence, investors will continue scouring the horizon for any signals that can push risk sentiment either way.
DXY tests 99-level as formal impeachment inquiry over President Trump could distract policy focus
The Dollar index is currently testing the 99.0 resistance level, even as investors keep a watchful eye on the formal impeachment inquiry over US President Donald Trump. The impeachment proceedings come at a time when global investors are already contending with multiple layers of uncertainties, from the US-China trade conflict to Brexit, all of which have kept the Dollar at elevated levels.
The timing of the inquiry is raising questions over the current US administration’s political will in forging ahead with its policy agenda, with the China trade deal in keen focus. Having reacted to the impeachment inquiry by resorting to the default risk-off mode, investors will remain vigilant in deciphering what the proceedings could mean for US policy continuity.
Pound slides as UK Parliament reconvenes to face Brexit deadlock
The Pound slid below the 1.24 mark against the US Dollar to reach its lowest since September 13, as the UK Parliament reconvened. All the emotionally-charged yelling in Westminster has yet to result in a meaningful Brexit deal, which keeps the Pound on a slippery slope towards 1.20 versus the Dollar. Although the prospects of a no-deal Brexit appear limited, it cannot be completely ruled out, hence capping the upside for GBPUSD.