The market mood was cautiously optimistic in Asia on Tuesday, as the optimism over a likely United States-Mexico-Canada Agreement (USMCA) and upbeat China’s inflation data was somewhat negated by the looming US tariffs hike and negative US-Sino trade headlines. The Chinese news outlet, Global Times said the downtrend in bilateral trade will be difficult to reverse even though a Phase One deal is reached.
Across the fx space, the US dollar steadied vs. its main competitors, allowing most majors to post small gains. The Kiwi emerged as the strongest, up +0.20% above the 0.6550 level following upbeat Chinese data while the Aussie also benefited from stabilizing the Australian NAB Business Survey and the iron-ore price surge, with 0.6840 tested. The USD/JPY pair bounced off support near 108.50 amid positive S&P 500 futures but the uptick was limited by declines in the Asian equities and Treasury yields. The Canadian dollar ticked higher against the greenback on USMCA optimism, with USD/CAD downed nearly 20-pips to near 1.3225.
Amongst the European currencies, both EUR/USD and GBP/USD traded better bid, with Cable looking to revisit eight-month highs of 1.3180 ahead of the UK GDP and Industrial Output data.
On the commodities front, both crude benchmarks trade modestly flat amid trade and growth worries, as traders await the weekly Crude Stocks data. Meanwhile, gold prices extended the side trend around 1460, in search of a clear direction.
Main Topics in Asia
China's trade surplus narrowed to $38.73 billion in November amid sharp drop in exports
China's exports to US dropped 23% in November
UK election polls: Tories maintain lead over Labour into final days
Beijing orders state offices to replace foreign PCs and software – FT
Mexican Foreign Minister: Mexico will not accept US labour inspections in USMCA trade pact
Japanese GDP Q3 beats expectations by 0.2%
Big FX platforms see e-trading volumes drop over past three years - BIS
S. Korea's Vice FinMin: Will act swiftly if volatility in financial market rises
Governor of China's Xinjiang expresses strong condemnation of US bill
Sources: US, Canada and Mexico are edging closer to USMCA trade deal - WSJ
Moody's: 2020 outlook for APAC banks is negative
PBOC Adviser Liu: China's potential growth below 6% over next five years
Key Focus Ahead
The immediate focus is not the UK data flow, including the monthly GDP print, Trade Balance, Industrial and Manufacturing Production, which will release at 0930 GMT. Next of note remains the German and Eurozone ZEW Business Survey, due at 1000 GMT. Besides the macro news, the UK political drama and trade-related headlines will continue to influence the market.
In the NA session, a few minority reports from the US docket will drop in but the American Petroleum Institute’s (API) weekly US Crude Stockpiles data, due at 2130 GMT, will grab some attention from oil and CAD traders. Also, fresh updates on the USMCA trade deal will be closely eyed.
EUR/USD: Struggling despite impending bull cross, focus on German ZEW
EUR/USD is struggling to find bids despite an impending bull cross of key averages. The odds appear stacked in favor of a bearish move. A big beat on German ZEW number is needed to mitigate bearish pressures.
GBP/USD nears multi-month top ahead of UK data dump, election drama continues
GBP/USD remains mildly bid around 1.3150 ahead of the London open. The pair surged to April month high on Monday but the languishing lead of the ruling Conservatives over the opposition Labour Party capped the upside. Focus on UK growth and industrial figures.
USD Holds Support Ahead Of FOMC
It’s a mixed regarding USD performance overall, yet DXY points towards a near-term trough which could see a lower Euro and higher USD/JPY (at least over the near-term).
UK Election Preview: GBP bulls to hold their horses
UK elections are critical for sterling traders this week, held on 12th Dec and results in for the morning of 13th Dec. Market euphoria could see GBP push higher across the board on a Tory victory.
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