US Session Forex Brief, May 9 – USD Holds Steady Ahead of US/China Meeting
Skerdian Meta • 4 min read
The sentiment turned negative over the weekend in financial markets after US President Trump tweeted that he was going to increase tariffs on China from 10% to 25%. That came as a surprise, given that the two giants had agreed on many things and they were coming to a conclusion, even though the deal wasn’t going to be great for all parties involved. Besides that, they were going to hold on another meeting this week, so those threats for increased tariffs seemed strange.
- Spanish Industrial Production – Industrial production turned positive in Germany in March after several negative months. But it is not changing in Spain. Industrial production for March was expected to turn positive after a 1.2% decline in February which was revised to -1.1% today. Production was expected to increase by 0.3% in March, but instead it posted another decline of 1.3%. The annualized number also came lower to -3.1% against -1.2%.
- China Holds on to its Position – China is preparing its defense against the US ahead of the meeting saying that it is fully prepared to defend its interest, and has determination to do so. They’re prepared for all possibilities but hope to resolve existing problems through cooperation and consultation. Although if the US implements tariffs, China will take necessary countermeasures. China is willing to continue talks with US to resolve dispute but firmly opposes unilateral imposition of tariffs. They continued saying that accusations on intellectual property theft are unreasonable. OK, this last comment is a lie, we all know. China also opposes sanctions against Iran, saying that they will destabilize the Oil market.
- BOE Saunders Speaking – BOE MPC member Michael Saunders was saying earlier today that Sterling would probably fall after no-deal Brexit. NSS. That would raise inflation. Would expect interest rates to go a bit higher over time but says the process won’t be far or fast. UK neutral rate is a lot lower than in the past and a Brexit deal would help economic outlook.
- UK Labour Leader Corbyn Speaking – Jeremy Corbyn of the Labour Party was commenting this morning as well, saying that the government has made no big offer in Brexit talks. The Labours can’t accept government deal or a no-deal Brexit, but can’t ignore referendum vote to leave the European Union. He ended the speech saying that general elections can’t be that far away.
- US PPI Report – The producer price index report was released a while ago and it came slightly softer than expected. Headline PPI came at 0.2% as expected, down from 0.6% in the previous month. Although, core PPI missed expectations of 0.25%, falling to 0.1% for April from 0.3% in March. PPI YoY remains unchanged at 2.2% as previously versus 2.3% estimated. Core PPI YoY excluding food and energy also remained unchanged at 2.4% versus 2.5% estimated.
- US Trade Balance – The trade balance has been holding in a range around -$50 billion for quite some time apart from the occasional jump such as the one to -$60 billion that we saw in January. Today’s report showed that it remained right at the middle of that range as US trade balance came at -$50B against -$51.4B expected and up from -$49.3B previously.
- US Unemployment Claims – Unemployment claims jumped to 240k in February for a few weeks, but they started falling after that and have been on a declining trend until the middle of April when they bottomed at 190k. But in the previous two weeks they jumped to 230k and this week they remained in that range at 228k, against 215k expected.
- US Final Wholesale Inventories – Inventories declined to 0.2% in February as last month’s report showed and they are expected to fall flat for March. This is the final reading after the prelim reading showed exactly that – the inventories fell flat at 0.0% in March and they are not expected to change.
- The trend remains bearish
- Fundamentals keep going against this pair
- The 20 SMA is pushing the price lower
The 20 SMA is now providing resistance
The situation in this pair continues to be the same since it turned bearish last Wednesday. The pressure remains to the downside and the price made new lows after the Reserve Bank of New Zealand made a surprise rate cut yesterday in the Asian session. Buyers have tried to reverse the price but the attempts have been pretty pathetic and the downtrend continues as the 20 SMA (grey) keeps pushing this pair lower while the 50 SMA (yellow) stands ready to provide resistance above.
Another boring day with very slow price action in financial markets today. The Chinese delegation is in the US and they will begin talks which will last two days. That’s a short negotiation period, which is a sign that we might still be far from a trade deal, especially after China backtracked on promises and the US threatened with more sanctions. But, let’s not be too judgmental.