Markets, Trade War, China Data

Craig Erlam MarketPulse

The panic at the start of the week looks to have passed for now, with equity markets facing a second day in the green on an apparent softening in tone from US President Donald Trump.

In the last 24 hours, Trump has been as vocal as ever and has sought to play down the breakdown in trade talks, instead referring to it as a “little squabble” and claiming they have not collapsed at all. This seems very at odds with the remarks he was making previously and suggests he may have been doing so with one eye on Wall Street.

Trump will have seen the response in the markets to the new tariffs and harsh rhetoric that has accompanied them and having satisfied a supporter base that wants to see a hardline with China, may have been looking to repair some of the damage suffered on Wall Street. We know he pays close attention to the markets and he won’t want a repeat of the fourth quarter.

Trump also once again took aim at the Fed, claiming if they cut rates the US would win the trade war, “it would be game over”. It’s highly unlikely the Fed will oblige in assisting with political matters but clearly the days of the central bank coming under pressure from the White House are not behind us.

Interestingly, the weaker Chinese data overnight has not really dampened the bounce we’re seeing in the markets. Considerably weaker numbers across the board – retail sales, industrial production and fixed asset investment – may have come as a greater concern at the start of the week but it appears the softer rhetoric from Trump is more meaningful to investors.

Author

Craig Erlam

MarketPulse

Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.