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Trump drops a bombshell before Thanksgiving, signs HK bill


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Donald Trump dropped a bombshell in the market by signing the controversial Hong Kong bill before the Thanksgiving break.

Asian markets were mostly down, except in Sydney where the ASX 200 recorded timid gains on a second straight day rally in communication stocks.

Gains in safe haven assets remained limited. The USDJPY advanced to 109.57, a notch closer to the next natural bull target of 110, Swiss franc traded a touch below the 1.00 mark against the greenback.

Though Trumps bold move has unnerved China, it will not necessarily rule out the signature of a phase one deal over the coming weeks. The two countries have been successfully managing the two issues separately so far. But of course, it heightened the risk of a no deal.

The US dollar extended gains on Wednesday as the third quarter GDP growth has been surprisingly revised from 1.9% to 2.1%, tempering worries of an imminent recession in the US. Durable goods orders rose 0.6% in October versus 0.9% contraction penciled in by analysts and -1.4% printed a month earlier. Personal income stagnated, but personal spending rose to 0.3% as expected from 0.2% previously. Chicago PMI improved from 43.2 to 46.3 in November, although the figure fell slightly short of 47 expected by analysts.

Overall, the US data pleased to investors.

Stocks in New York gained but Trumps comments sent US futures down in Asia. Gold traded near the critical $1450 support an ounce, before bouncing back to $1458 on fading risk appetite.

Strong dollar sent the EURUSD below the 1.10 mark. Bulls and bears have been fighting at this level.

Pound gains after YouGov MRP poll

The pound outperformed against the greenback. Cable advanced to 1.2951 as most-trusted YouGov MRP survey showed that Johnsons Conservatives may win a 359-seat majority in December election. While Johnsons top aide Cummings said that things are much tighter than what they seem, Johnson will likely come out victorious and get his Brexit done as he promised.

Moving forward, opinion polls will likely become increasingly influent, creating some price volatility across the pound markets. But it is worth remembering that opinion polls dont necessarily reflect the outcome of an election. Hence opinion polls per se may not justify a breakout of the 1.28/1.30 range.

The FTSE is set to slip below the 7400p mark at the open on fading appetite, stronger pound and lower energy prices.

Oil hit by higher US inventories, turnaround in OPEC expectations

Oil prices were hit by higher US inventories as production peaked to a record high. Oil stockpiles rose 1.6 million barrels last week versus 500000-barrel-contraction expected by analysts, who believed that higher energy utilization at this season would have somehow tapped into the reserves. But they have been wrong.

The latest Bloomberg survey also tells that the expectation of further production cuts from next weeks OPEC meeting have evaporated. The reversal in OPEC expectations perhaps explains a part of the solid resistance prior to the $60 per barrel in WTI.

Opening calls

FTSE to open 35 points lower at 7395

DAX to open 35 points lower at 13252



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About the author


Ipek Ozkardeskaya is a senior analyst at MBAex with a solid experience in the financial industry. She has strong technical background in economics and quantitative finance. Previously, she worked as a senior market analyst in London Capital Group, FX strategist in Swissquote Bank and as a client sales executive at HSBC Private Bank in Geneva. She also developed quantitative models in automatic trading as part of BCV’s Structured Products team. Ipek has a Master’s degree in Financial Engineering & Risk Management and a Bachelor degree in Economics from University of Lausanne.
 
Contributing  author since 11/09/2017

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