Asian stocks were mixed as the deadline for new tariffs neared. According to the Wall Street Journal, officials in Beijing and Washington were planning a delay in the implementation. The tariffs were to take effect on Sunday. In two interviews yesterday, Larry Kudlow said that negotiators did not have an arbitrary deadline. These remarks could be reflecting Trump’s views on the current situation. Still, Trump is known to change his mind often especially when he is criticised by Conservatives on television. Washington and Beijing have accelerated the trade war in the past few days. China announced that it would get rid of American technology in the public sector while the US is considering banning Chinese-made buses.
The Japanese yen was relatively unchanged against the USD after the country released inflation and manufacturing data. In November, the producer price index (PPI) rose at an annualised rate of 0.1%. This was higher than October’s contraction of -0.4%. The PPI rose by an MoM rate of 0.2%, which was lower than October’s growth of 1.1%. Meanwhile, data from BSI showed that manufacturing conditions have worsened in the fourth quarter. The BSI large manufacturing conditions declined to -7.8. This was lower than the consensus estimates of 0.2. The Japanese economy has struggled as the US and China trade war has affected demand. Japan’s trade war with South Korea has also affected this growth.
The market will focus on the United States, where the Federal Open Market Commission (FOMC) will deliver its last interest rates decision for the year. The market expects the Fed to leave rates unchanged at the current range of between 1.75% and 2.0%. Traders will be waiting to hear about Jerome Powell’s plan for the coming year. The market will receive inflation data before the Fed delivers its verdict. Economists polled by Reuters hope that the headline CPI rose by an annualised rate of 2.0% in November. They expect the core CPI to remain unchanged at 2.3%.
EUR/USD
The EUR/USD pair has been rising over the past two days. The pair has risen from a low of 1.1040 to a high of 1.1097. The price is along the 14-day moving averages and slightly above the 28-day moving averages. The RSI has remained unchanged at around 54. The momentum indicator has also been unmoved around the 100 level. The pair will likely see some significant moves ahead of the Fed and ECB decisions.
GBP/USD
The GBP/USD pair declined as a poll showed that Tory’s lead in Parliament had narrowed. The pair declined from a high of 1.3214 to a low of 1.3105. The price is slightly below the 14-day and 28-day moving averages while the Average True Range (ATR) has soared. This is a signal that volatility could rise ahead of the tomorrow’s general election.
USD/JPY
The USD/JPY pair has been consolidating as the market waits for more news on trade and the Fed. The pair has formed a symmetrical triangle pattern on the hourly chart. The price is slightly above the 14-day and 28-day moving averages. The RSI is slightly below the oversold level of 30. The pair may see a significant breakout in either direction later today.
