Asian markets are poised for a positive price action, bolstered by growing confidence that the Fed might successfully navigate the US economy to a ‘soft landing’. This optimism is further enhanced by anticipations of additional economic stimulus from China. The People’s Bank of China has recently made a significant move, injecting a record CNY 1.45 trillion into the market. This largest liquidity boost in seven years aligns with China’s strategic efforts to fortify its economy, as evidenced by unexpectedly robust retail sales and industrial output figures.
The foreign exchange (FX) markets are also in the spotlight, offering insights into current risk positioning. Despite the massive liquidity injection, the Chinese Yuan has maintained a relatively stable stance against the Dollar, hitting that short-term inflows to the local markets are strong. This stability could bolster bullish sentiment in Asian equities, particularly as certain sectors are perceived as undervalued, fostering expectations of a brighter growth outlook and potentially lower interest rates in the coming year.
In the bond market, a key barometer of short-term risk appetite, there is a noticeable steepening in the US Treasury curve. This suggests a recalibration of market expectations, shifting away from previous dovish positions, particularly after a recent decline in yields. This sentiment adjustment comes as global bonds teeter on the brink of offsetting their 2023 losses, highlighting the intricacy and interconnectivity of the financial landscape.
Amid these economic and financial developments, the high-profile meeting between US President Joe Biden and Chinese President Xi Jinping has captured significant global attention. Their dialogue, aimed at addressing and potentially resolving tensions rooted in economic rivalry and diplomatic missteps, is viewed as a pivotal moment in international relations. President Xi’s emphasis on the critical nature of the US-China relationship underscores its profound impact on global economic and geopolitical dynamics.
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© 2019 High Leverage FX - All Rights Reserved.