Asian Stocks Mixed as Investors Mull “Phase One” Trade Deal

While the rollback of tariffs is set to brighten the outlook for Asian economies, it remains to be seen whether the region can pick up enough momentum to take full advantage of the receding trade tensions. Should the economic data over the coming months uphold such a notion, that should spur on more risk appetite, which bodes well for assets across the emerging-markets complex.

Dollar set to end 2019 on resilient note

The impending impeachment vote against President Donald Trump, though harbouring the potential to trigger knee-jerk reactions, is not expected to have a meaningful impact on the Dollar’s performance going into the new year. The Dollar Index’s (DXY) presence above the psychological 97 level has been justified by the resilient US economic data, as evidenced by the latest factory manufacturing and home construction data, while aided by the weaker Pound. The upcoming US Q3 GDP data should also keep DXY above 97.0, provided the official print is in line with market expectations at 2.1 percent, while a better-than-expected GDP revision could send DXY towards the 97.5 mark.

Sterling could be in for more volatility in 2020

Despite the Pound’s recent drop, the immediate support level for GBPUSD has shifted higher to 1.30, now that UK election risk is behind us. Still, 2020 could be another volatile year for Sterling, as the UK seeks to shape its future relationship with the European Union by year-end, with the risk of a hard Brexit apparently still on the table. Should a hard Brexit become likelier as the year progresses, that could prompt GBPUSD to trade closer towards the lower 1.20s.

Oil sustained by demand-side optimism

Brent’s rise above the $65/bbl psychological level demonstrates the risk-on sentiment in the markets, with demand-side uncertainties dialed down following the limited trade deal between the US and China. Moving forward, supply-side risks could still serve as a drag on Oil prices, with non-compliance among OPEC+ members, rising US inventories, and shale output being the key factors to watch, as well as any surprise spike in geopolitical tensions involving Oil producers.

Gold bulls need strong reason to break above $1500

Gold prices continue to remain supported, despite its bias to the downside, pending further details on the expected US-China trade deal. Still, potential gains for Bullion appear capped at the $1500 level, unless Gold bulls are shown signs that the global economy is not in a position to take full advantage of the expected rollback in trade tariffs in 2020.

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