Buying stocks on the back of next weeks US-China trade meeting is more do with wishful thinking rather than anything else. While a face to face meeting is positive none the less, it's hard to imagine anything coming of it other than more quibble and a sequence escalation tweets from President Trump.
The meeting is to accomplish little more than figure out why the soft peddled G-20 concessions haven't gone through. But with China now accusing the U.S. of undermining global stability and with the Washington Post report that for the past eight years, China's Huawei has been helping North Korea develop its wireless communications network, its hard to imagine a happy conclusion to these meetings.
Gold
Gold prices are up and are holding firm amid a widely expected rate cut from the Fed on July 31. But gold remains firmly bid on dips reflecting the never-ending nervousness among investors about the global macro environment. If you agree with my quibble and Trump tweet view, buy Gold.
Oil
Despite the considerable API inventory draw it hard to envision the EIA report living to the survey expectations. Given the markets intense focus on the weakening macro environment, there isn't a strong enough middle east escalation bid to hold a market in check if the EIA draw comes out lower than expected. I suspect traders are playing the API inventory report neat and tidy waiting for the more highly regarded EIA report before committing to a directional move.
The Euro
The euro has fallen under a good bit of pressure ahead of the ECB as trader continue to debate a possible rate cut at tomorrows meeting. While a rate cut is bearish for the euro in its own right, but an aggressive policy shift will increase the odds for an imminent Q.E. significantly, and this is what could drive the euro dramatically lower.
Japanese Yen
USD/JPY has been supported over the past couple of sessions by slightly firmer risk tone following the U.S. debt ceiling deal, and constructive news that U.S. trade representative Lighthizer is set to lead a trade delegation to Shanghai Monday. But trader continues to fade moves higher as they are not convinced that the trade meeting in Shanghai will result in anything meaningful
Australian Dollar
Comments from the respected Westpac chief economist Bill Evans supported the move as he brought forward his forecast for the next rate cut from November to October. He also expects a February cut which would take rates to 0.5%. Evans also suggested that the RBA could pass a serious of measures, like the BoE's term funding scheme, to ensure a rate cut from 0.75% to 0.5% was passed on.
The Aussie sell-off intensifies after the release of the July's PMI releases with both manufacturing and services weaker than the previous month. Manufacturing dropped from 52 to 51.4 while services fell from 52.6 to 51.9. New order growth was soft with a reduction in new export orders while employment decreased for the first since April and by the most since the survey began in May 2016. Worryingly the decline was centred on the service sector.