Monday Malaise
Today, the market activity will be limited due to the US holidays. Bitcoin rallied to $8’700 on the back of rising concerns over US and China trade tensions. Asia shares were mixed, yet Shanghai fell on Chinas industrial firms fell in April, highlight slowing growth. Rhetoric between the two global superpowers has ramped up a decrease in the likelihood that a deal is in reach. The longer a standoff last the higher the probability of further escalations. Should Trump-Xi meeting at G20 fail to trigger a new round of high-level discussion, USD/CNH could attempt new highs as market sentiment sinks near a long-term deadlock.
The EU elections results saw the populist parties largely failed to chalk up a kill shot. Liberals and Green could be viewed as the winner of these elections. German and Greek spread widened further as Greek ruling party Syriza had a weak showing. In regards to the UK, the EU election failed to send a clear signal for Brexit or UK general election. After UK Prime Minister Theresa May resignation on Friday Brexit uncertainty is at a new high in our view. Sterling downside sell-off is far from over, as the politician, chaos in the UK has just started. In broader terms, the EU 28 country political system is extremely fragments making moving forward in a coordinated effect difficult. EURUSD has been marginal selling pressure down to 1.1195 on long-term expectations. This is ironic, since US-China trade feud opens a significant window for EU business. Moving forward we anticipate that China will take a harsher tone leaning towards a protracted trade war and additional retaliatory tariffs.
