Putting a brave face on trade talks
Yet another US official used the word “close” this morning while referring to the progress in the US-China Phase 1 trade negotiations. This time it was the turn of Larry Kudlow, White House economic adviser, who added that talks had been constructive and the “mood music” pretty good. Maybe they are getting close this time….
As has been the case more recently, the markets’ reaction to the latest close comments was modest. US indices shrugged of yesterday’s lackluster session and rose between 0.32% and 0.36%, with the NAS100 index leading the way.
In the currency markets, the US dollar continued its current slide after US yields turned lower yesterday. USD/CNH fell 0.19% to 7.0050 while USD/SGD slid 0.11%. AUD/USD perked up after posting the biggest one-day loss since July in the aftermath of the weak jobs data yesterday. The pair rose 0.12%, rebounding off the 61.8% Fibonacci retracement level of the October rally and could be on track for the first daily gain in six days.
AUD/USD Daily Chart
RBNZ looking at February
Christian Hawkesbury from the Reserve Bank of New Zealand has said that the February meeting is a “live” meeting, though the outlook would need to change in order for a rate cut to be warranted. Earlier in the day, Governor Steven Orr had said the Bank was in a nice position to observe the incoming data and that the door is open for a rate cut. Monetary is currently viewed at very stimulatory and rates will be low for a long period.
Earlier this week the Reserve Bank surprised market doves by holding the benchmark rate a 1.0% which caused a more than 1% rally in NZD/USD, the biggest one-day move since January. Yesterday saw a mild retracement but the FX pair is up 0.15% at 0.6390 this morning.
NZD/USD Daily Chart
US retail sales on tap
Still to come in Asia we have Japan’s final industrial production and capacity utilization numbers for September. First estimates were for 1.4% m/m growth in production and a 0.6% decline in utilization. Hong Kong’s final GDP growth reading for Q3 is not expected to be changed, though there should be a downside risk. Q4 certainly won’t be any better.
Retail sales in the US probably rose 0.2% m/m in October, according to the latest survey of economists, a smart turnaround from September’s 0.3% decline. US industrial production is seen steady at +0.4% m/m though capacity utilization is expected to dip to 77.1% from 77.5%. September business inventories complete the calendar.