This week should open up with a gap since Trump & Xi are producing a 90 day cease fire on trade tariffs with the US agreeing to halt planned tariff hikes in exchange for China’s commitment to buy more US oil and agricultural products. Both countries have also agreed to further talks on trade. I expect risk assets and Aud, Nzd as well as Jpy crosses to benefit this week.
The French government is considering a state of emergency in response to protests by the so called “gilets jaunes” movement in Paris yesterday which have became violent with demonstrators clashing with police, burning cars and looting shops.This is the 3rd week of the demonstrations which started as an online movement against an increase in fuel tax hikes and has morphed into protests against stagnating wages, a decrease in purchasing power and President Macron himself.
Themes for the Week:
- Fed Chair Powell will appear before the House on Wednesday and Senate on Thursday, but the timing might be altered due to the funerals of George H. Bush. Powell’s comments last week were viewed as dovish so the market will see if Powell confirms the market’s view.
- US non-farm payrolls to be released on Friday will also play an important role in shaping Fed expectations
- OPEC is scheduled to meet next week and there was already plenty of discussion in the weekend papers about what the cartel could agree on in order to stabilize oil prices and even cause a rally. Russia, one of the world’s major crude producing nations, has been bargaining with OPEC’s leader, Saudi Arabia, over the timing and volume of any reduction.
- The RBA and Bank of Canada meet in the week ahead and neither central bank is expected to change policy.
- The odds look stacked against UK PM May getting parliament’s nod on Dec. 11. Members of her own Conservative Party, the opposition and the Northern Irish party which props up May’s minority government all oppose it. Furthermore, on Dec. 4, the European Court of Justice’s will decide whether Britain can revoke its notice to withdraw from the EU without agreement of the other 27 states.
Data in the Week Ahead:
- US NFP
- Bank of Canada
- Reserve Bank of Australia
- Australian Current Account, GDP, trade data and Retail Sales.
- The state of the China economy remains in focus amid fears of slowing growth and the coming week sees the release of the Caixin MFG and Services PMI
On the Radar:
Aud & Nzd closed on a strong note last week and I expect a boost into the new week on Trump/Xi progress. EurAud/EurNzd shorts look good, but also AudJpy/NzdJpy longs. I also like longs on the Dow given these drivers.
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