The risk appetite in the financial markets increased before the G20 summit in Japan starting on Friday. It could have happened because of the positive information about the Saturday meeting and the talks between the US and Chinese presidents.
The information presented to the media shows that the United States and China have initially agreed to a truce in a trade war. Details of the agreement will be presented before the presidents Donald Trump and Xi Jinping meet – said South China Morning Post. President Trump, in turn, said that further significant additional tariffs will be introduced on goods from China if there is no progress on the trade agreement after its planned meeting with the President of China at the G20 summit in Japan.
As you can deduce from Trump's statement, this is another play that may be aimed at exerting pressure on China, so that they decide to make concessions that the United States wants. If this does not happen, further tariffs will be imposed on China, which may have serious consequences for the market. The escalation of the trade war may translate into a greater likelihood of recession in the US and a larger global economic slowdown. It can also exert more pressure on the FED when it comes to interest rate cuts. This, in turn, may affect the US dollar.
The meeting between Trump and Xi will take place on Saturday at 11:30 in Osaka, the first market reaction will be expected already on Sunday evening after the start of trade in New Zealand.
However, before this happens, we are already observing the decline of the Japanese yen recognized as a safe haven, recently rising gold, but also the rise in futures contracts on stock indices. It can be said that the market is trying to optimistically approach what will result from the meeting of US and Chinese presidents.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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