In­vestors on ten­ter­hooks ahead of Trump-Xi meet­ing at G20 sum­mit

Financial Mirror (Cyprus) - - WORLD - By Luk­man Otu­nunga, Re­search An­a­lyst at FXTM

Global trade ten­sions have cap­ti­vated fi­nan­cial mar­kets this year with Trump’s es­ca­lat­ing trade war with China bruis­ing global sen­ti­ment and in­vestor con­fi­dence.

The tit-for-tat tar­iffs be­tween both na­tions have rum­bled on for months on end, fu­elling fears of an all-out trade war be­com­ing re­al­ity. With Wash­ing­ton al­ready plan­ning to in­crease tar­iffs from 10% to 25% from Jan­uary 1, the USChina trade dis­pute is reach­ing a very dan­ger­ous tip­ping point. A trade war be­tween the two largest economies in the world rep­re­sents a ma­jor threat to global eco­nomic growth and based on this, there are no win­ners. The G20 sum­mit in Ar­gentina will be of sig­nif­i­cant im­por­tance as US Pres­i­dent Trump and Chi­nese coun­ter­part Pres­i­dent Xi are ex­pected to dis­cuss trade.

It is fair to say that the mar­ket out­look for the rest of 2018 hangs on whether Trump and Xi are able to see eye to eye on trade. Although a break­through deal is deemed un­likely, any en­cour­ag­ing signs of co-op­er­a­tion or in­ter­est for fur­ther ne­go­ti­a­tions will be warmly wel­comed by fi­nan­cial mar­kets. Risk sen­ti­ment is seen mak­ing a re­turn if Trump ac­cepts China’s re­quest to hold off a planned in­crease in tar­iffs. How­ever, if talks de­scend into dis­agree­ments and ten­sions end up es­ca­lat­ing, in­vestors will most likely en­ter De­cem­ber adopt­ing a risk-off ap­proach as trade war fears heighten.

What­ever the out­come of the Trump-Xi talks, it most cer­tainly will have a last­ing im­pact on global sen­ti­ment.

Com­mod­ity spot­light – Gold

The near-term out­look for Gold will be heav­ily in­flu­enced by how the Dol­lar re­acts to trade talks be­tween Trump and Xi dur­ing the G20 Sum­mit.

A pos­i­tive out­come to trade talks is seen weak­en­ing the Dol­lar amid im­proved risk sen­ti­ment, con­se­quently of­fer­ing Gold prices some sup­port. Although Gold may also find sup­port if ne­go­ti­a­tions prove un­suc­cess­ful, the gains are likely to be limited by the Dol­lar which re­mains a go-to cur­rency in times of uncer­tainty. Tech­ni­cal traders will con­tinue to closely ob­serve how the pre­cious metal be­haves be­low the $1,228 re­sis­tance level. A fail­ure for prices to break above this point is poised to re­sult in a move back to­wards $1,218.

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