Brian Rademacher, Economic Development Director of Ormond Beach, told Xinhua in a recent interview at the east coastal city of Florida, The US and China should solve the trade tensions soon.

Key Quotes:

“International relations are "very important" in helping local companies do business with foreign partners including the Chinese and "it is necessary to keep those relationships open."

"We hope that they (the United States and China) find common ground soon so we can move on with trade as normal … and the companies can continue to be successful without having to do any damage to the relationships."

It's worth noting, China is the second largest merchandise trading partner of Florida and the largest merchandise import origin of the state, as cited by the Florida-China Association.

Reuters is out with the latest statement from the US-based Fitch Ratings, affirming Hong Kong’s credit rating at 'AA+'; with Outlook Stable.

Key Points:

“Hong Kong's ratings are underpinned by its exceptionally strong public and external finances, high income levels, and a resilient and flexible economy. The ratings are principally constrained by the territory's deeper integration with lower-rated mainland China

The external environment has become more challenging in light of US-China trade tensions, prompting contractions in Hong Kong's export and import values yoy since late 2018, and a sharp decline in import and export-related employment.

Hong Kong's economy is vulnerable to further escalations in trade tensions because of its role as a global trade intermediary, but the agency does not believe rising tensions are likely to undermine the territory's fundamental external balance sheet strengths.

The Hong Kong dollar has remained near the weak-side of the convertibility band of 7.85 since mid-2018, resulting in numerous interventions by the Hong Kong Monetary Authority (HKMA) under the rules-based Linked Exchange Rate System, and prompting some market speculation that the viability of the currency regime could be at risk.

Growth has slowed considerably due to greater external challenges, decelerating global growth, and the resulting spillover to domestic demand.

Fitch believes Hong Kong banks remain sufficiently resilient to challenges from slower economic growth and increased competition, due to their sound profitability, asset quality, liquidity and capitalization.”

One-week Hong Kong dollar (HKD) Hong Kong Interbank Offered Rate (HIBOR) rises 87 bps to 2.17%, highest since April 30.

Additional Headlines:

One-month HKD HIBOR rises to 2.42%, the highest since October 2008.

Two-month HKD HIBOR rises to 2.39%, the highest since November 2008.

  • INR volatility hits lowest since August 2018.
  • Dollar recovery likely as the market seems to have overpriced rate cuts.

The Indian Rupee’s (INR) one-month ATM volatility fell to 5.125 on Tuesday, the lowest level since Aug. 9, 2018.

Notably, the volatility gauge has dropped sharply from 9.275 to 13-month lows over the last four weeks.

The USD/INR pair ended with 0.20% losses on Tuesday and is trapped in a falling wedge, as per the daily chart.

A break above the wedge resistance, currently at 69.53 would create room for a rise to recent highs above 70.50.

A breakout cannot be ruled out as markets have overpriced Fed rate cuts, as per Goldman Sachs and a broad-based US dollar could be seen if the upcoming US macro data better estimates.

It is worth noting that the 10-year US Treasury yield is now seen at 2.14%, up 10 basis points from the multi-month low of 2.05% hit on June 7.

INR's volatility

The latest survey conducted by Bank Indonesia (BI), the Indonesian central bank, showed that the country’s Consumer Confidence gauge ticked slightly higher at 128.2 in May when compared to 128.1 booked in April.

Key Details (via Public Technologies):

“Consumer optimism was driven by the Current Economic Condition Index (CECI), in particular, the respondents' perception of current job availability and conditions for buying durable goods. On the other hand, consumer expectations of future economic dynamics remained solid despite decreasing on the previous period, with the decline primarily affecting expectations of incomes and business conditions in the next 6 months.

The latest survey also showed how the respondents predicted a build-up of inflationary pressures in the next 6 months (November 2019) as seasonal demand for goods and services begins to increase near the end of the year.”

Meanwhile, the USD/IDR pair moved-off the highs and now trades around a flat line near 14,240 levels, with 14,335/45 seen as a tough nut to crack for the buyers.

USD/IDR Technical Levels

  • Hong Kong protesters oppose the government’s decision to debate extradition to China in the parliament.
  • China CPI rose to a 15-month high.
  • US CPI will be the key to follow from now.

With protests in Hong Kong turning serious and China’s inflation data meeting expectations, gold prices surge to the intra-day high around $1333 during early Wednesday.

The yellow metal was on its back foot since the week’s start as relief from trade tussles trimmed safe-haven demand.

However, threats to Mexico and China from the US President Donald Trump, coupled with criticism to the Fed, restricted the bullion’s downturn.

In Hong Kong, the government’s decision to debate a law in the parliament to allow extradition to China met with wide protests that turned violent. However, latest reports suggest that the government has postponed debate on the extradition bill to an unspecified time.

On the other hand, inflation numbers from China, one of the world’s largest Gold customer, met market expectations wherein the consumer price index (CPI) grew to 2.7% from 2.5%.

The global risk barometer, US 10-year treasury yield, remains mostly unchanged at 2.141% by the press time.

Today’s US CPI data will be on the traders’ radar as the greenback has an inverse relation with the precious metal. The headline inflation gauge may decline to 0.1% from 0.3% but CPI ex-food and energy can increase to 0.2% from 0.1% on a monthly basis.

Technical Analysis

Having reversed from $1320, the quote can rise to $1342 ahead of targeting current month high around $1348 while a downside break of $1320 may fetch prices to April high near $1310 and then to $1300 round-figure.

  • Asian stocks tarde mixed with China reporting inflation at 15-month highs.
  • The US-China trade tensions linger.

The stock markets in Asia are lacking a clear directional bias this Wednesday morning with China reporting the consumer price inflation at 15-month highs.

As of writing, Japan’s Nikkei is trading flat at 21,200, while Australia’s S&P/ASX 200 is adding 0.16% at 6,557.

Stocks in New Zealand are also reporting moderate gains, while those in South Korea are flashing red, despite the dovish comments by the Governor of South Korea’s central bank earlier today.

The Shanghai Composite index is currently down 0.46% at 2,910 and Hong Kong’s Hang Seng is down 1.62% at 27,336.

China’s consumer price index (CPI) in May rose 2.7% from a year ago, the highest since February 2018. Meanwhile the producer price inflation (PPI) rose 0.6% in May as expected by economists.

A sustained rise in the CPI may make it hard for the People’s Bank of China (PBOC) to imitate stimulus measures in a bid to counter the downside pressures on the economy arising from the trade war with the US.

So far, the US has imposed tariffs on $250 billion worth of Chinese goods while Beijing has slapped duties on $110 billion on American goods.

President Trump said on Tuesday he was holding up a trade deal with China and is not interested to negotiate unless Beijing agrees to four or five “major points”.

In a recent interview with Xinhua, Peter Holmes, trade expert and fellow of the UKTPO at the University of Sussex, opined that the UK and US are unlikely to reach a trade deal in the foreseeable future, despite both the leaders eager to strike a deal.

Key Quotes:

"My personal opinion is that the only gains readily available would be tariff reductions on some food and chemical products, and possibly exemptions from U.S. tariff surcharges."

Referring to the possible scale of the future US – UK deal, "but as we have seen USMCA (United States-Mexico-Canada Agreement) do not in fact provide much by way of guarantees."

Deep regulatory gains are hard to realize in the deal, noting that "any regulatory alignment with the U.S. would have two costs".

"The U.S. side is really determined to press the UK to change its food safety rules. Chlorine washed chicken is symbolic but also a real concern."

"U.S. is trying to get the UK to align its standards system in that of the U.S., which would create additional barriers with the EU."

Analysts at National Australia Bank (NAB) offer their expectations on Thursday’s Australian labor market report and its implications for the Reserve Bank of Australia (RBA).

Key Quotes:

“Thursday's labor market data are key for financial markets given the RBA's repeated emphasis on the importance of the unemployment rate for near-term policy.

NAB is forecasting a strong report given the employment boost from temporary workers hired to run the federal election. We expect employment grew by 40k and the unemployment rate ticked down to 5.1% in May.

If we are wrong and unemployment increases again, then the market would price in the risk of a July rate cut.”