The biggest driver of currency flows this week are US / China trade headlines. Early on the outlook was grim with talk of the phase one trade deal delayed to December. However sentiment shifted dramatically overnight after China's Ministry said they agreed to lift tariffs as the deal progresses. Both countries want a Phase 1 deal on paper by the end of the week and the US confirmed that tariff rollbacks are possible. There's opposition in the US government but the mere possibility that the tariffs could be lifted sent currencies and equities sharply higher. The Dow Jones Average rose to its strongest level ever while USD/JPY hit a 5-month high. There are still some conflicting headlines including US Senior Economic Advisor Larry Kudlow's comment that there will be tough concessions if a phase 1 deal is completed. As our colleague Boris Schlossberg noted this morning, the "US-China trade story has had almost as many ups and downs as the Brexit battle," but for now the latest headlines suggest progress towards a meaningful agreement, which is enough to boost risk appetite. However the restrained rally in the Australian and New Zealand dollars also reflect the market's cautiousness in this headline driven market. Barring any fresh news that could cast doubt on progress towards a deal, USD/JPY could extend its gains to 110. (Kathy Lien,Managing Director of FX Strategy, BK Asset Management.)
ON OTHER HAND ,
( MALAY TRANSLATION) Sentimen pasaran mempengaruhi pergerakan JPY. BOJ mengekalkan polisi sedia BoJ dilapor mengurangkan pembelian bon dan dana pencen memberi tumpuan pembelian bon asing. Cukai pengguna Jepun dinaikkan ke 10% bermula bulan ini. Dua kemungkinan kesan kenaikan:
1. Kenaikan inflasi
2. Penurunan permintaan
Data IHS Markit menunjukkan penurunan aktiviti pada Oktober akibat kenaikan cukai pengguna. Taufan juga menjejaskan aktiviti ekonomi, terutamanya dalam sektor perkilangan. Perbezaan ketara wujud daripada sudut permintaan antara sektor perkilangan yang menurun dan permintaan baru untuk sektor perkhidmatan yang meningkat. (Zulle CTFX)
Conclusion: Relief in sentiment, Lower activities in JPY
In something of a breakthrough in the U.S.-China trade talks, the two countries have agreed to roll back tariffs on each other’s goods in phases as they work toward a deal, according to both sides. “In the past two weeks, top negotiators had serious, constructive discussions and agreed to remove the additional tariffs in phases as progress is made on the agreement,” China’s Ministry of Commerce spokesman Gao Feng said Thursday. White House economic adviser Larry Kudlow confirmed the advance in negotiations. “If there’s a phase one trade deal, there are going to be tariff agreements and concessions,” he told Bloomberg. The negotiations are ongoing and a time or place for the signing of any pact is yet to be determined.