Collinsonfx Daily Market Commentary

US/China trade talks are scheduled to resume Thursday and the brinksmanship has begun. China has called on the US to remove punishing sanctions and have tried to limit the scope of negotiations. The US has hinted at severe repercussions, if the Chinese are not earnest in their negotiations. The latest US threats revolve around capital investment, with restrictions on US investment in Chinese companies and restricting Chinese access to US capital markets. The optics are not good! The Political war between President Trump and the Democrats have emboldened the Chinese and weakened the Presidents hand. The NFIB Small Business Optimism reported gains as the economic conditions in the US remain strong, while the Chinese economy struggles. The EUR fell back to 1.0925, while the GBP crashed back to 1.2200, as a Brexit deal becomes less likely, while the No-Deal Brexit increases in likelihood.

The US/China trade war has not helped the trade exposed, commodity currencies. The speculation has been overwhelmingly negative and any gains in local currencies, were soon eliminated. The AUD retreated to 0.6725, while the NZD fell below 0.6300 again, despite an unexpected strong fiscal surplus announcement. The NZ Government's fiscal position continues to improve, due to rising tax revenues, but this is not being used in stimulative infrastructure spending, probably to keep the powder dry for an election in 2020!?