Fox reports Trade Adviser Peter Navarro saying that there is no agreement at this time to remove any of the existing tariffs as a condition of the phase one deal and the only person who can make that decision is US President Trump.
Nothing to see here as the real question all along has always been if the President is ok with the trade overhang soiling his ticket into an election year. So, at will, the President could send equity bulls cheering and gold investors crying into the weekend if he compromises.
But as usual, when it comes to Whitehouse communication skills, they are seldom without a high level of chaos and confusion. But none the less the markets seems to be running with the fact that something has been agreed that features some form of a rollback in tariffs.
Its still risk on but just a bit dimmer
Gold Markets
Gold is struggling although finding some support from profit-taking and possible weekend hedges and as US bond yields come off their overnight highs in Asia. However, trade talk optimism remains solid, although things are a bit muddled as it's not yet clear if President Trump has agreed to the rollback in tariffs.
But we have been down this road before and its the second time the gold market corrects to this $1460 area since the year's highs, the first attempt happening in early October. But this time around the market is less interested in buying the dip. These could be the possible reasons for the lack of bounce.
Most Asian gold traders are debating whether to wait for the US session and a possible flurry of bearish for gold comments on trade talks or cut and head out to the pub.
(for me that would be for a diet coke as I'm honouring my year-long commitment to fitness hahaha)
But rest assured, at some point between now and the NY close, in the absence of a bullish trade headline, prices could be nudged higher on short-covering and profit-taking into the weekend.
But the real temptress to hang short is the significant pain trade waiting on the other side of $1460 level, which was a critical multi-year high technical pivot point on the move higher back in August. ETF's and the 6 million ounces bought since August are mostly in at much higher level, and these positions could be the first to buckle on the breach. In the meantime, look for the new $ 1460-$1480 wickets to remain upright.
Oil markets
It's been dead in Asia as traders, for the most part, remained sidelined waiting for the next trade headline. In the meantime look for oil markets to follow the general trade talk mood music and overall risk sentiment.
Asia Markets
China's Oct exports and imports contracted less than the market expected, which provides some relief, although still in contraction, as China tries to reach a Phase-One trade deal with the US. But the print failed to get much of a rise as the real toxic sludge to gets releasee on Saturday when China CPI is expected to print over 3 % which should keep PBoC policy tethered to an anchor.
Malaysia's central bank says the statutory reserve requirement ratio will be lowered to 3.00% from 3.50%, effective Nov. 16. The move is aimed at maintaining enough liquidity in the financial system (Reuters)
Currency markets
Yuan
The USD/CNY fix was in-line with expectations. Spot has consolidated in a 6.9650-9738 range, above the overnight low. But I think today was a good time to take profits despite a brighter direction of travel for the Yuan. The PBoC might not be jumping for joy about the pace of play and could temper all the excitement next week. It would be unusual for them to do so ahead of a significant international policy event, but we've had a fantastic run from 7.15 so time to re-evaluate
USD-ASIA
Profit-taking into the weekend as the AsiaFX rally is gassed and the surging US yields have slightly tarnished the Asia carry.
G-10
The US dollar
The USD buying bias continued today. Mostly in USDAsia and USD CNH as weekend profit-taking set in. And in G10 it was vs EUR and AUD.
The SoMP was dovish and weighed on the Aussie while the EU commissions grim read of the EU economy has shied Asia investor from the Euro. Despite the risk-on mood, it seems higher US yields will naturally generate some bid for the dollar.
The Yen
But with very low vols its tough even for the G-10 pros to find a directional bias outside of USD/JPY which remains the primary beneficiary of higher US bond yields and frothy risk on the momentum.
The Pound
Cable dropped on the 7-2 split vote from the Bank of England and dovish statement. But with the market skew towards a bullish Brexit outcome, position in sterling is very much to the top side. Under normal circumstance an unexpected central bank dovish pivot could trigger a sell-off in the 2-3 % magnitude, even more so whit some participants thinking rate hike post-Brexit. So, with cable precariously perched just above 1.2800, it appears to be on less than stable footings even more so when you factor in the bullish Brexit position and the potential for a long squeeze to unfold. For now, expect a little more consolidation until there is a daily close below 1.2780/90, which would be a significantly bearish development.