Caution Returns on US-China Trade Uncertainty

Caution is set to dominate financial markets on Tuesday as investors juggle with trade uncertainty and tensions in Hong Kong.
Lukman Otunuga
  • Market mood sours on US-China trade concerns
  • Pound elevated by Brexit party decision
  • Oil dips on conflicting trade war signals

The general tone of markets remains cautiously optimistic over the United States and China signing a “phase one” trade deal. However, this sentiment continues to be tested by conflicting signals as US President Trump last Friday dismissed China’s claim that the US will roll back tariffs on Chinese imports as part of an interim deal. These types of mixed signals from US-China trade talks are not only fostering confusion but weighing on global risk appetite as investors move to the sidelines.

Asian stocks struggled for direction on Tuesday following the mixed performance of Wall Street overnight. Slow progress on the US-China trade could rekindle global growth concerns ultimately spurring risk aversion. Given the lack of clarity offered on trade developments, all eyes will be on President Donald Trump who is scheduled to speak to the Economic Club of New York later today. Any fresh hints on progress in trade negotiations will be warmly received by investors.

Pound turbocharged by rising chances of Conservative majority

Sterling bulls were injected with a renewed sense of confidence on Monday after Nigel Farage said his Brexit party will not contest Conservative seats in the upcoming election.

This development certainly comes as an early Christmas gift to Boris Johnson as it raises the odds of a Conservative majority being secured at the December election. The prospects of a Conservative victory breaking the Brexit deadlock and offering direction is likely to support the British Pound in the near term. Away from Brexit, Britain’s economy avoided a recession in the third quarter of 2019 by expanding 0.3% but the annual pace of growth was the slowest in almost 10 years at 1%. Given that the Pound offered a muted reaction to the report confirms how the currency remains heavily influenced by the election and developments in Westminster.

Looking at the technical picture, the GBPUSD is bullish on the daily charts. A solid daily close above 1.2890 should see a push towards the psychological 1.3000 level. Alternatively, sustained weakness below 1.2890 may trigger a decline back towards 1.2790.

Crude Oil moved by trade developments

Crude oil prices struggled for direction on Tuesday amid fears about the outlook for energy demand thanks to uncertainty around US-China trade talks. Although there is some measure of cautious optimism over trade talks, mixed signals from both sides could strain global sentiment and investor confidence. Given how Oil bulls and bears remain heavily influenced by growth and demand concerns, further losses could be on the horizon should trade uncertainty persist.

Focusing on the technicals, WTI Crude is under pressure on the daily charts. Sustained weakness below $57.50 should encourage a decline towards $57.00 and $56.00.

Open your FXTM account today

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.