Market Drivers December 6, 2018
Risk off flows dissipate by EU Open
A slew of US data on tap
Nikkei -1.91% Dax -1.19%
Europe and Asia:
AUD AU Trade 2.3B vs. 3.2B
AUD AU Retail Sales 0.3% vs. 0.2%
EUR GE Factory Orders 0.4% vs -0.3%
USD ADP 8:15
USD ISM Non Manufacturing 10:00
CAD Ivey PMI 10:00
The sharp risk-off flows that greeted traders on the start of Asia open dissipated a bit when London came on line helped by positive comments from China Commerce ministry on the state of US-China trade negotiations.
USDJPY dropped to a low of 112.58 at the start of Tokyo trade when a sloppy open in US equity futures and reports of an arrest of Huawei executive sent risk reeling on concerns of renewed global tensions. The Huawei was arrested in Vancouver to be extradited to US on violation of US sanctions against Iran. While the incident threatens to become a major diplomatic confrontation, for now both sides appeared to be restrained about the matter, but the situation could certainly become much worse should US decide to prosecute.
In the meantime, Chinese Commerce ministry noted that consensus has been reached with US on agriculture, energy and cars and will be immediately implemented. The news instantly put a bid into USDJPY which recaptured the 113.00 figure in morning London dealing.
With no major economic releases until North American trade, currencies were content to tread narrow ranges with EURUSD contained to about 20 pips while cable traded quietly just above the 1.2700 figure. PM May suggested that there may be a delay in the meaningful vote on Brexit in Parliament scheduled for next Tuesday indicating that she has every intention of pushing the vote through. Her primary argument is that the alternative would be a hard Brexit which could send UK economy into a tailspin. Cable jumped on the comments, as traders remain optimistic that some sort of compromise will be found.
In North America, a slew of releases could shed further light on the state of US economy as the market will get a look at the delayed ADP data and ISM Non-Manufacturing report. Both releases are expected to be slightly lower this month, but if there is a risk of downside miss which could put renewed pressure on the greenback as traders begin to price in the prospect of a Fed pause in monetary tightening in 2019.