Powell’s Speech In Focus, Dollar Climbs
Hope for a trade breakthrough in the G20 meeting at the end of this week, and a clearer rate hike roadmap following Power’s speech tonight lifted market sentiments globally. President Trump and Chinese President Xi will have dinner in Buenos Aires this Saturday evening, creating a good opportunity to pause the trade stand-off between the world’s two largest economies. Meanwhile, President Trump also made it clear that in the event of a non-deal, his administration is ready to impose anew round of tariffs on all the remaining Chinese goods that ship to the US, making it a binary option for China. Either there is a deal, or no deal.
Fed chair Powell’s speech tonight will be carefully watched by traders globally for clues of monetary policy shift towards 2019. This speech is crucial to clarify the diverging opinions by other Fed members, as trade uncertainty and a soften growth outlook has raised the prospect of a pause of interest rate hikes next year.
General Motors’ plan to slash 14,000 jobs, or 15% of its North American workforce and shutter 7 facilities worldwide to cut cost boosted its share price by 4.8% overnight. The automaker is facing a challenging environment amidst rising input cost and sharp fall in its sales in China as trade war looms.
Dollar Index climbed to 97.3 area this morning, edging higher towards its 12-month high. Sterling fell 0.56% overnight and euro slide 0.3% against the greenback as Brexit deal is facing strong resilience from Teresa May’s parliament. The outlook for sterling is further loomed by PM May’s leadership challenge as she seemed to fail to unite the congress and negotiate a satisfactory withdrawal deal with Brussels. Technically, GBP/USD is trending down and its immediate support level is at around 1.270 area. Breaking down below this level will probably pave the way for more downside towards the 1.26 area.
US 3Q GDP reading and New Home sales are probably the most important macro data tonight. The US economy is forecasted to expand at 3.5%, moderated from a strong 2Q reading of 4.2% but still a decent rate of growth. New Home sales – forecasted to bounce to 578,000 from a disappointing October reading of 553,000. A string of lower new home sales figure flagged the risk of rising interest rates that make mortgage service more of a burden. For oil traders, this week’s Petroleum Status Report will help to pain the colour of current supply-demand relationship. The US commercial oil stockpile is forecasted to have increased by 700,000 barrels last week, a drastic fall from 4.85 million barrels increase in the week earlier. Higher readings is likely to exert negative impact to oil prices as it suggests glut concerns.
US GDP – Preliminary
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