Risk trades rallied Monday but the tone may quickly shift with Trump talking once again about aggressive China tariffs. The US dollar led the way while the yen lagged. CFTC positioning data showed fresh bets against the euro. Just before the US close, the Premium short in the DAX was closed for 300 pts gain, with notes highlighting how high the current move could go and whty the other Index long remains open. More details found in today’s Premium video.
USD/JPY rose by more than half a yen and the Nasdaq climbed 2% Monday in an upbeat start to the week. Futures, however, slipped after the close when Trump said he expected to hit China with higher tariffs in January. He said it was highly unlikely the rise to 25% tariffs on Jan 1 would be delayed and that all Chinese goods could soon be hit with tariffs.
The commodity currencies slid after the comments were published. The question is whether the comments were posturing or reality. Trump meets with Xi on Friday in Buenos Aires and he undoubtedly wants the Chinese leader to believe that he’s not bluffing. At the same time, does it make sense to believe Trump would hit businesses and consumers with tariffs that will undoubtedly slow growth in 2019? The tempered market reaction reflects that skepticism. At the same time, the market didn’t believe Trump would ever implement tariffs.
CFTC Commitments of Traders
Speculative net futures trader positions as of the close on Tuesday. Net short denoted by – long by +. This week’s report was delayed because of the US holiday.
EUR -47K vs -37K prior GBP -43K vs -47K prior JPY -100K vs -102K prior CHF -20K vs -19K prior CAD -6K vs -3K prior AUD -59K vs -58K prior NZD -19K vs -22K prior
The moves were small but there is fresh interest in selling the euro as the economic data deteriorates. On Monday, Draghi conceded the numbers have been disappointing since September but there was no commitment to alter forward guidance.
