Hopes on Trade Truce As G-20 Leaders Gathers

G-20 leaders have gathered in Japan and this is where the focus is among traders. There is some optimism that some frame work will be agreed on the future talk on trade war between the US and China. It is this optimism which pushed the Asian stocks higher and the same momentum is filtering into the European market today. Safe haven assets such as gold aren't the first choice of investment among traders.

Everyone is expecting both countries to hold the fire when it comes to trade war, however president Trump isn't shy off talking about his “plan B” under which billions more in tariff could be introduced. He has made it clear that the US will do less business with China and it will only introduce more tariffs meaning “billions and billions of dollars a month”. His statement clearly contradicts with Treasury secretary Steven Mnuchin. His comment were more optimistic about the possibility of a trade deal.

The ongoing trade war is having an impact on the Chinese economic data and I am sure that President Xi has his plans to combat this. The trade war which has been going on nearly a year now and it isn’t good for either side, sooner they admit to this fact the better it is. Both sides are suffering doesn’t matter the narrative and the devil is in the detail- in terms of economic data. If both leaders fail to have any kind of future framework which can keep these negotiation going, markets are likely to react adversely and this is means sell off for the equity markets.

Looking at the score card, the US markets are still holding on to some meaningful gains: the S&P500 index is up 16.23% YTD, the Dow Jones has climbed 13.76% while the NASDAQ index is leading the way with a gain of 19.21%. Whereas the volatility index, VIX is down over 36% YTD and the same index, VSTOXX for the European markets has plunged 41%. Clearly, the dominant trend is in favour of riskier assets.

Closer to home, Boris Johnson has played down the prospects of no deal Brexit by saying that the chances are a “million to one against” the UK exiting the EU with no deal. Despite these comments the sterling dollar pair has failed to show any positive reaction. It has broken the critical level of 1.27 and currently trading down by -0.17 percent. The immediate support is at 1.2644 and a break of this may open the door towards the next psychological level of 1.26.

As for the Bitcoin price, the volatility is high once again, and it has retraced from its high of $13,851. More and more miners have joined this space because after the recent rally in the bitcoin price. This has made the mining space even more competitive. Bitcoin mining difficulty has touched a high of 7.93 trillion surpassing the previous record of 7.45 trillion. However, Satoshi’s asset is programmed to overcome this difficulty level every 2,016 blocks. Generally speaking, the recent retracement was absolutely necessary because the price moved too far too fast. This retracement in price could provide an opportunity for those who have been sitting on the side.

In terms of economic data, it is the US GDP q/q number which matters the most today. The forecast is for 3.1% which is the same as the previous reading. If we see a number which is softer than the market expectations, it would fuel the speculation of deeper interest rate cut by the Fed.

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