Weekly Market Wrap 11-15/11/2019

Marius Paun | London, UK | Senior dealer | Friday, 15th November 2019

The trade talks between China and the US encountered an obstacle again over agricultural purchases placing world markets on alert. Wall Street Journal reported that although President Trump wants China to buy $50 billion worth of soybeans, pork and other agricultural products, Beijing does not want to commit to attaching an exact figure to the deal. Both sides are also disputing the timing and the extent of lifting the tariffs on Chinese imports. In reaction, Trump said if there is no deal, he would raise tariffs significantly.

On another note, China industrial production for October came in at +4.7% versus expectations of 5.4%. At the same time, retail sales were also a miss, rising 7.2% versus 7.8% expected, thus pressing Premier Li Keqiang to highlight the need for more support for the real economy.

The US Federal Reserve Chair Jerome Powell testified before the Congress saying the monetary policy is appropriate and the economic outlook remains favourable. He added the data is not yet pointing to either labour market or inflation heating up but the lingering risk of a slowdown in global trade remained.

Back in the UK, the preliminary GDP data for the third quarter showed an increase of 0.3% versus expectations for a 0.4% rise. Although it was slightly weaker, the figures showed Britain managed to avoid recession amid all that hype of Brexit and/or general election uncertainty. The pound sterling moved higher as Brexit Party announced they will not compete in Tory Party held areas. Furthermore, on Friday afternoon GBPUSD broke above 1.29 when the same Brexit Party stepped down from 43 additional constituencies thus helping the Tories in their quest for a majority.

On Tuesday the major European stocks indices moved up, boosted by fresh news that Donald Trump administration plans to delay tariffs on European auto imports by 6 months. Some additional good news was Germany GDP data for the third quarter. Europe’s biggest economy narrowly avoided recession as the numbers showed an increase of 0.1% versus predictions for a 0.1% drop.

The EURUSD traded within a tight range of fewer than 80 pips for the whole week and looks set to post only a marginal increase (around 1.1050 Friday afternoon).

In a surprise decision, the Reserve Bank of New Zealand held its benchmark interest unchanged at 1% sending the NZD sharply higher. RBNZ cut 50 basis points at the August meeting but this time they said, ‘if things deteriorate will keep cutting but there is not enough information to go lower now’.