The growth of negative sentiment in the global equity markets provided local support to the US dollar.
The negative dynamics in the US stock market, which once again caused the desire of investors to cash out (cash), supports the dollar. The collapse of the local stock market is supported by the negative dynamics in the technology sector and Apple shares which have slumped. Pressure on this sector is primarily a decrease in expectations in the markets, especially after the Americans' pickings with the Chinese at the ASEAN summit held a few days ago in Singapore. This turned out to be a bad prelude before the G20 meeting in Buenos Aires, which will take place in the coming days.
Investors fear that the failure of negotiations between the US and China will lead to a new round of tension not only in the economic sphere, but also in the political sphere, which in turn threatens serious losses to American companies that have their production in China or place their orders for production at local factories.
Observing such a picture, we can assume that the lack of settlement of the trade conflict can be a serious reason for the further fall of shares of American high-tech companies, which can attract other sectors of the American economy. The general increase in the negatives in the markets and growing fears that all this may lead to a continued slowdown in economic growth in the United States, China and Europe, primarily in Germany, as already indicated by economic statistics, can become an impetus for a massive departure of investors from risk while buying defensive assets – government bonds of economically strong countries, which, incidentally, is already observed. It can also be the basis for the growth of the attractiveness of the Japanese yen, the Swiss franc and the US dollar, the appreciation of which can occur simply because of the elementary growth in demand for American treasuries by non-US residents and the banal cash out of investors in the wake of selling in the stock markets.
In our opinion, the outcome of the talks between Beijing and Washington will be important in this regard. If they do not agree at the summit, the previously promised duties on Chinese imports will be automatically raised in the United States from January, which will lead to a response from the PRC and against this background a new round of escalation of tension in the world with all the ensuing negative consequences will be guaranteed.
Forecast of the day:
The EURUSD is trading below 1.1400. It is under pressure from a drop in the risk appetite of investors in world markets. It is possible that the pair will recover to this mark, but if it does not pass it and does not consolidate higher, then we should expect its fall to continue to 1.1300.
The AUDUSD pair is trading below 0.7240, also against the background of aggravation in world markets and a fall in investor tendency to take a risky game. If the pair does not grow above this level, we can expect it to turn down and fall to 0.7165.
