Weekly Market Wrap 18-22/11/2019

Marius Paun | London, UK | Senior dealer | Friday, 22nd November 2019

It appears that Fed Chair Jerome Powell met with US President Donald Trump at the White House to talk about economic growth, inflation and employment. On one hand, Trump tweeted ‘meeting was good & cordial’ and Powell just repeated his remarks from the Congressional hearing last week. Analysts became a tad suspicious, especially when shortly after, Trump said that if there is no deal with China the tariffs will actually be raised.

To make things worse the US Senate passed a bill to support Hong Kong protestors. Does the meeting with the Fed sounds like a possible warning or is it part of the tactic? Things were more confused when on Friday he reversed course yet again saying ‘a trade deal is very close’!!! Meanwhile, impeachment hearings don’t look very good for the White House as the US ambassador to the EU appeared to be confirming the quid pro quo i.e. conditioning US financial aid to Ukraine with investigating his rival’s son.

In the meantime, FOMC meeting minutes showed that the officials are currently reasonably contented with the level of interest rates and agreed that the economic outlook remained skewed to the downside.

In reaction, China reiterated that the US should stop interfering in matters in Hong Kong and threatened retaliation for the US supporting the bill. But on the other hand, also combining stick with carrot, China economists looked rather convinced that phase one deal is still on the cards to be signed before the year-end.

Back in the UK, the pound sterling started the week on the offence closing in on the 1.30 handle on the back of positive sentiment for Boris Johnson’s Conservatives. However, the election manifesto put forward by the Labour Party, which promised to nationalise everything from utilities, transport, health, postal and education system, sparked a reversal. Consequently, the GPBUSD looks now to be on course to retest support at 1.28.

Newly appointed as the chief of European Central Bank, Christine Lagarde had the first taste of what’s coming regarding her stance of a rather loose monetary policy. German Chancellor Angela Merkel said that no new debt remains the cornerstone for budget policy.

Sensing the danger, ECB chief economist Philip Lane came to the rescue saying the current inflation rate is ‘unsatisfactory’ and that ‘monetary stimulus will allow inflation to grow’. The euro is on course to end the week on the back foot after coming within touching distance of 1.11 to the US dollar.

The Reserve Bank of Australia’s meeting minutes were perceived as rather more dovish than initially expected to push the Australian dollar lower. The Board emphasized that it needs more time to assess the impact of the 3 cuts made earlier in the year before taking any further action.

Mirroring the central bankers around the world, Bank of Canada Governor Poloz appeared to have also hit the brakes. He commented in Toronto that the Canada economy is in a good place overall and ‘the monetary conditions are about right’. As a result, the Canadian dollar jumped to 1.3280 against the US dollar.