Chinese Trade Talks Pessimism Continues to Impact Market
- Dollar weakens amid US-China trade deal pessimism
- Housing Starts in October rose 3.8% on a monthly basis
- Investors waiting for release of Federal Reserve’s meeting on Wednesday
US yields are weakening this week because Chinese officials said they remain pessimistic about a trade deal with the United States. According to news, the main sticking points are connected with agricultural and intellectual property.
It is also important to mention that currently, China has its own range of domestic problems. This could give the Trump administration stronger reasons to maintain its tough stance on China.
The situation in Hong Kong is in the focus as apprehension about a crackdown on demonstrators grows. This could hurt global risk sentiment as investors would fear further deterioration in the relations between China and the US. There are concerns that such tensions could derail the trade negotiations with the US.
Monetary policy likely to remain appropriate in US
The US has published Housing Starts in October, which rose 3.8% on a monthly basis. These readings had no big impact on the USD, and the US Dollar Index was down 0.05% on the day at 97.78.
Federal Reserve chairman Jerome Powell had a meeting with US President Trump this week. They discussed interest rates, low inflation, dollar strength, and its impact on manufacturing and trade. They have concluded that the baseline outlook for the US economy remains good, and the current monetary policy is likely to remain in place.
President Trump also said that the monetary policy must be accommodating, which could be negative for the currency. He thinks the country needs low-interest rates, but Powell reaffirmed that the Fed will make decisions based on data.
Background noise and conclusion
Trade war concerns still represent the negative sentiment that rules the financial world, with traders still waiting for “the light at the end of the tunnel”.
The US economy is in a good place and there is no important reason to be worried. According to estimates, the Fed will keep interest rates at their present levels for the foreseeable future, despite President Trump’s latest complaints about high interest rates.
Wall Street’s main indexes started the day in the positive territory, the Dow Jones industrial average rose to 28090, and the S&P 500 and Nasdaq are also trading near record levels.