Asia update
Markets continue to struggle, but across the region, things are probably not as bad as some would have expected. And while it's far from business, as usual, the fact is few were bullishly positioned for a comprehensive trade deal anyway. But instead, CFTC positioning data show non-commercial and retail investors are already long JPY, gold, and 10-year U.S. Treasury, which suggests investor positions are for the most part in " safe " mode.
USDCNH, Asia’s key currency risk barometer, there has been a pronounced unwind this morning of last weeks trade optimism move. But this is occurring low liquidity with China and Hong Kong market on holiday. Offers remain far and few which might be exacerbating the outsized move. While the USDCNH step higher makes perfect sense, low liquidity conditions may be worsening the movement.
Gold
Gold is doing what it should be moving higher after all these years $1550 print was due to trade war escalation. But the lack of market follow-through suggests market participants likely need further evidence from the Federal Reserve Board they're on an easing bias to take gold prices to the next level. Indeed, it feels Gold's current movement is being critiqued against bond yields and what the Federal Reserve is going to do next. Lower real rates are what ultimately count, and everything else is noise.
Oil
Oil has recovered from last week lows but remains under pressure in part due to the negative U.S.-China trade talk headline muddying the landscape but mostly a result of bearish macro developments of which the latest trade headline does little to lend support.
Trade war winds aside, the macro headwinds continue outweighing supply concerns, this despite tensions in the Middle East and a reduced spare capacity pillow. However, given the dreary macro data has yet to dent global oil demand quantifiably, and the recent inventory builds have been broadly in line with seasonal expectations. Traders may be reluctant to run too far ahead of the current supply and demand data not to mention the rising spectre of more OPEC compliance adjustment.
On the flip side, while traders may appear complacent about middle east supply risk, it may only be their immediate reverting impulse to balance risk premiums against a backdrop the global supply pool and tepid demand projections that see them better sellers of oil risk in this environment