Breaking News
0

China: How Much Trouble For FX?

By Kathy LienForexMay 22, 2020 02:14PM ET
xhaszzx.com/analysis/china-how-much-trouble-for-fx-200525483
China: How Much Trouble For FX?
By Kathy Lien   |  May 22, 2020 02:14PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

China is once again a hot spot for geopolitical uncertainty and social unrest. This week, China unveiled a plan to take a stronger stance on anti-government protests and dissents in Hong Kong. It proposed new security laws that would punish opposition to the mainland. While the details have not been revealed, this would be a major blow to civil liberties and the city’s autonomy. The fear is that this would elicit a strong response from the U.S., which could see this as a reason to re-examine Hong Kong’s special trade status with the U.S. In recent weeks, tensions have flared between the U.S. and China, with the U.S. calling for China to take responsibility for the COVID-19 outbreak. The U.S. threatened to delist Chinese companies from exchanges, restrict new companies from listing, cap American exposure to Chinese investments, warn of further tariffs/“economic penalties” and approved a controversial arms deal with Taiwan. Investors worry that this latest move on Hong Kong will give the U.S. the perfect opportunity to rebuke China further by threatening to revoke Hong Kong’s special trade status and leave it subject to the same restrictions as China.

The question is how much trouble could U.S.-China trade tensions be for the financial markets. The latest flare up drove the Australian and New Zealand dollars sharply lower on Friday. U.S. stocks fell, but USD/JPY held steady. If the U.S. were to change Hong Kong’s trade status, the psychological impact would be significant, with currencies and equities falling sharply. But on a longer term basis, the reality is that U.S. and Hong Kong export very little to each other, so the trade impact will be limited. Yet, the real fear is Hong Kong’s financial industry and whether China will retaliate by restricting American businesses in Hong Kong. The mere possibility could cause major disruptions in the financial markets.

We don’t think either country will take it that far. Threats could be made, but the costs are too high, especially for China, which probably thinks it's smarter to wait six months to see if a new U.S. president is elected in November. The U.S.-China trade war haunted the markets throughout 2019, and that did not stop stocks from climbing to a record high. So at the end of the day, these negative headlines will hurt currencies and equities but the impact that China worries have on the markets should be short lived.

The economic calendar next week is relatively light, with U.S. markets closed for Memorial Day on Monday. The most important U.S. event risks will be consumer confidence, which should be stronger, revisions to Q1 GDP, personal income and personal spending (which should be weaker). Fed Chairman Jerome Powell also speaks at the end of the week. The main driver for the greenback should be risk appetite.

For the euro, Germany’s IFO report and Eurozone inflation data will be the most important. EUR/USD hit a wall after rising above 1.10 this week. We expect the currency to continue to outperform, especially as we look forward to improvements in German business confidence. There are no major UK economic reports on the calendar but nearly all of the data this week was disappointing, including today’s retail sales, which fell by a historic amount in the month of April. The Bank of England is widely expected to increase stimulus next month and reinforce its open mindedness to negative rates. As a result, sterling should continue to underperform other major currencies.

Canadian retail sales fell 10% in the month of March, driving the loonie lower against the greenback. The decline was less than expected, especially when we exclude auto purchases – spending without autos fell only 0.4%. March GDP numbers are due next week, but Bank of Canada Governor Stephen Poloz’s speech will be the main focus. With no major economic reports scheduled for release, the Australian dollar will take its cue from ongoing developments in China. The New Zealand dollar, on the other hand, has trade data, a Financial Stability Report and comments from Reserve Bank Governor Adrian Orr.

China: How Much Trouble For FX?
 
China: How Much Trouble For FX?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at xhaszzx.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (19)
Jiang Botao
Jiang Botao May 27, 2020 10:06AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
the US is hurting global trade and economies with these trade disputes. only with more trade will growth continue. this admin is on the wrong side of history
Terence Williams
Terence Williams May 25, 2020 2:42PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
China is behaving like the Mafia "going to the mattresses".They appear to be moving inward to ward off any chances of dissent. Hong Kong is a huge risk for the CCP. The CCP could be put in position of world scorn. The CCP is only concerned for its own survival..and will do anything to maintain power. China is adopting a belligerent stance towards anyone who question their policies..cranial ******inversion.
Thinh Mai
Thinh Mai May 23, 2020 12:40PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Can I ask you for GU to continue to fall down at the level 1.2100 ?
Pat Berkowicz
Pat Berkowicz May 23, 2020 12:40PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Definitely looking for short bearish trend to 1.212
Chanel Iman
Chanel Iman May 23, 2020 12:40PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hahaga Thinh Mai. Not sure if Kathy Lien is one of the "big boys". Maybe you gotta ask George Soros to do that? ;)
David Sun
David Sun May 23, 2020 10:53AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The cold trade war between Austrilia and China has started and escalated . The export of iron ore and coal to China will drop dramatically and this will hit Austrilia. At the same time NZ will benefit from exporting wools and beef. So AUD/NZD will drop. In my opimion, we will see the super power of state capitalism and see1.0 this year.
Kevin smarte
Kevin smarte May 23, 2020 7:00AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
a strong response from the US? They're locking down their own people... I think this summer you will see the uprising of the people everywhere the CCP will fall
foon-lung YANG
foon-lung YANG May 23, 2020 4:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
2²1
du ich
du ich May 23, 2020 1:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
China should reduce dependence on US dollar as soon as possible. Some loss in short term but great return in long term.
Kevin smarte
Kevin smarte May 23, 2020 1:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
how about they let their people be free
Brandon Son
Brandon Son May 23, 2020 1:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
impossible when the majority of the world operates on USD
Lisa Hayes
Lisa Hayes May 22, 2020 5:35PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
China needs to let go of control. Their people don't need to be micromanaged. Wishing them peace, freedom and prosperity.
Kyle Mack
Kyle Mack May 22, 2020 4:10PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
if Chkna doesn't want to play nice then the USA will have a small bump in the road but in the end the USA doesn't need China so China needs to get their act together
Mayorl Seeslo
Mayorl Seeslo May 22, 2020 4:10PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I'm seeing a lot of public support for people's volatility boycotting Chinese goods. China will try to push them through their allies like Turkey Pakistan and Saudis. we'll have to see.
Lisa Hayes
Lisa Hayes May 22, 2020 4:10PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Exactly. More honestly and human rights from China. If they change they could be the best but they need to give humans more rights and be more honest.
Milos Bajsanski
Milos Bajsanski May 22, 2020 4:10PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Mayorl Seeslo volatility? you mean voluntarily?
Chris Black
ChrisBlackforex May 22, 2020 4:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you Kay! Have a great weekend...
Alamgir Alamgir
Alamgir Alamgir May 22, 2020 3:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Jc Lin
Jc Lin May 22, 2020 3:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Youngster movementin hk are fake democracy ⚰️😱
Jc Lin
Jc Lin May 22, 2020 3:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks china! U are great! 🇨🇳
Karim Mehouri
Karim Mehouri May 22, 2020 2:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you.
Anathi Mnyaka
Anathi Mnyaka May 22, 2020 2:27PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
thank you
CHIN TUN KOH
CHIN TUN KOH May 22, 2020 2:27PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
KATHY, to me, your are the best source of concise, relevant, comprehensive and most importantly TIMELY information to guide me in my FX trading decsions. My compliments.
Bulent Balci
Bulent Balci May 22, 2020 2:25PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Very clear and informative, thanks !
Karim Momtaz
Karim Momtaz May 22, 2020 2:23PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks Kathy appreciated
Babacar Junior Diop
Babacar Junior Diop May 22, 2020 2:00PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank that’s clear !
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's xhaszzx.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email
We have a special offer for you