US China Tensions Dominate Trade

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Market Drivers November 20, 2019
US and China spat over HK
Fed minutes on tap
Nikkei -0.53% Dax 0.79%
UST 10Y 1.74%
Oil $55/bbl
Gold $1475/oz
BTCUSD $8130

Europe and Asia:
No Data

North America:
CAD CPI 8:30
USD Fed Minutes 14:00

FX markets remained very quiet but clearly had a risk-off tilt as equity markets across the globe sold off on escalating US-China tensions.

Last night US Senate unanimously passed a resolution in support of Hong Kong protesters raising the ire of officials in Beijing. Under the first Senate bill, U.S. Secretary of State Mike Pompeo would have to certify at least once a year that Hong Kong retains enough autonomy to qualify for special U.S. trading consideration that bolsters its status as a world financial center. It also would provide for sanctions against officials responsible for human rights violations in Hong Kong.

According to Reuters,” There was no immediate response from the White House, which has yet to say whether Trump would approve the Hong Kong Human Rights bill. A U.S. official said recently that no decision had been made, but the unanimous Senate vote could make a veto more difficult for the Republican president.”

The political standoff comes at a time of stalled negotiations and worries from investors that Trump Administration may escalate tariffs against Chinese goods creating a second round of contraction in global manufacturing. With risk assets at near all-time highs, the prospect of a sharp profit-taking selloff in equities remains high, but so far stocks have held their own dropping only 50 basis points overnight and keeping USDJPY stable near the 108.50 figure.

If however, selling intensifies as the day proceeds then the pair could test the 108.00 figure as shorts press their case.

Boris Schlossberg
Managing Director

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