Investors refrain from risky trades at the start of the trading week, as Trump poured cold water on positive expectations on the US-China trade relations. Nevertheless, traders continue to express hope for resolving the long-standing dispute at least in the form of a partial deal on this stage. There is increasing uncertainty around the roll back in mutual tariffs but in general, global investors don’t hurry to press the panic button for now.
During this week, markets will further closely monitor developments in the US and China. In this context, Trump’s statements in the Economic Club of New York tomorrow will be of interest for investors, as the US leader could give some clarity on the potential trade deal with China. By the way, should Trump deliver some aggressive comments, risk aversion could get more apparent in the global markets.
Also, traders will also pay attention to the upcoming Federal Reserve governor testimony и Congress on Wednesday and Thursday. Comments from Gerome Powell will affect sentiment in the markets should his tone will differ substantially from the central bank’s message sent following the late-October monetary policy decision, when the regulator cut the rates for the third time since summer.
As such, the Federal Reserve chief is likely to confirm that further steps will depend on the incoming economic data. Should Powell point to some progress in the US-China trade talks towards a deal and the improving data, the greenback could receive a short-term boost in the second half of the week. At the same time, there is a risk that the governor will indicate a possibility of further rate if the economy weakens. In general, the upcoming event could bring some volatility to the markets in the days to come.
On the data front, the US CPI and retail sales reports will be in focus on Wednesday and Friday respectively. It is expected that core consumer price index remained at 2.4% in October. So should the result come in lower, the USD bulls will be disappointed as they will take this as a signal for further cuts in rates. Meanwhile, retail sales could recover last month after a dip by 0.3% in the previous month.