No more risk-off mood for currency markets

Forex Distribution

This Thursday, the United States Dollar showed just a few signs of changing, following the overnight risk-off move, generated by the clash between the US and China over Hong Kong.

Once again, the Chinese government warned the United States that “firm countermeasures” could be taken, as a response to the US legislation that backs the anti-government protesters in Hong Kong. Even more, the Chinese are confident that any other attempts at disrupting the government were “doomed to fail”.

Nevertheless, a risk appetite was seen returning in London trading, following the absence of signs that the negotiations for an initial trade deal – a phase one, as it has been referred to – between the United States and China had been compromised.

No spectacular moves at all

This morning, the USD index was less than 0.1% trading within the usual narrow ranges. The Japanese yen, on the other side, despite being considered a safe bet, was up around 0.1% versus the dollar. Finally, the Swiss franc was up with under 0.1% versus the USD.

“The moves have been quite modest because we’re still waiting to see what China’s response is – what they’ve said so far is quite vague,” said RBC Capital Market’s chief currency strategist Adam Cole.

“They’ve not gone so far as to say explicitly that this threatens the phase one trade deal, which is clearly what markets are worrying about, and for that reason, the reaction so far has been quite mild,” he added.

In the meantime, the offshore yuan was also down 0.2% against the USD, but still managing to trade within this week’s regular ranges.

Finally, the Australian dollar, otherwise exposed to trade, remained at a flat level against the United States dollar but managed to recover territory, following six weeks of lows, due to a combination of insufficient domestic data and risk-off mood.

Thanksgiving, to ‘blame’ for the relaxed activity

Traders are now expecting a relatively quiet day – or even an entire week – in the markets, due to record-low volatility, as well as the prolonged weekend, due to Thanksgiving in the United States.

Moving on to the Eurozone, the overall economic sentiment registered a bigger than usual rebound rate in November. There was a sentiment that went up among several categories, including consumers, retail traders or even industry, compared to the previous month. Still, it remained in a negative area.

US-China trade war