By Han Tan, Market Analyst at FXTM
Asian stocks were posting mixed results on Tuesday amid reports that the US and China cannot agree on the next meeting date to resume trade negotiations. Such headlines remind investors yet again of the tremendous gulf between the US and China in reconciling their differences over trade, leaving the world economy hanging in the balance.
The recent slew of PMI readings from various economies only serve to highlight the ongoing slowdown in global economic activity, while further diminishing hope for an economic rebound going into 2020.
Pound plummets ahead of UK Parliament clash of wills
The Pound is testing the 1.20 support level against the US Dollar, ahead of the UK Parliament reconvening Tuesday. Markets are digesting the headlines about a possible snap election in the UK, even as they brace for the clash of wills that’s set to play out in Westminster this week, given the reported attempt to block a no-deal Brexit.
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Ultimately, the various political permutations will be judged on whether they raise or dilute the chance of a no-deal Brexit, which has been deemed the worst-case scenario for the UK economy. Should investors get the sense that a no-deal Brexit can be averted, or at least delayed, it would offer relief for Sterling.
Any perceived rise in the likelihood of the UK crashing out of the European Union without a deal should send the Pound lower. All things considered, the Pound remains on its slippery slope as investors continue to ditch the currency amidst the seemingly unending Brexit uncertainties.
Dollar Index breaches 99 in view of Friday NFP
The US Dollar is going from strength to strength, pushing higher past the 99.0 psychological level, as investors await Friday’s US non-farm payrolls report for August. Even though markets are already expecting another Fed rate cut later this month, the Dollar doesn’t appear dissuaded from its climb.
The Greenback’s resilience is buffered by the overall risk aversion in global markets, as well as the US economy that appears to be on better footing compared to the overall dismal outlook for major developed economies. Until risk appetite can claw its way back, there are very few reasons for the Dollar to give up most of its gains over the near term, barring an overt intervention in the US Dollar.
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