Turnaround Tuesday
Who doesn't love a good old Turnaround Tuesday story in the markets, but before I get too far ahead of ourselves, we have the Pboc to thank for tweaking the fix just enough to convince the markets mainland authorities are not embarking on a wave of aggressive Yuan depreciation.
While the imminent threat of a currency war has receded, the market is still hostage to escalating trade tensions.
And not to overthink matters, China's manufacturing PMI remains sub-50 and with Chinese growth all but sure to soften, investor sentiment could stay soggy over the short term.
Gold markets
I was sharing this view with a few colleagues this morning after we cut our year-long gold position overnight. It's not because I don't think gold could move higher but rather because I stay true to my signals.
My outside target for gold this year was $1470, and when viewing the latest Gold move in correlation to the USD, it suggested the movement was far too quickly relative to the underlying DXY and that we may be entering a period of consolidation where an opportunity to reengage gold positions at much better levels might present itself .
As well I was looking at two-channel for the USD. The weaker channel is for the USD to languish on a more dovish Fed. But I think the more compelling driver is via worldwide trade and growth where the US dollar tends to outperform when global trade weakens as the 'US's open economy remains relatively resilient through trade war fiascos.
Also, I expect the Global equity market will rebound once the RMB noise settles and the market return focus to central bank easy money policy.