Focus on trade developments, geopolitical risks

We expect trade developments to heavily influence market sentiment and investor risk appetite in the week ahead.

Although trade tensions between the world’s two largest economies seem to be easing following reports of China placing major orders of U.S. soybeans and reducing U.S. auto tariffs, it may be too early for any celebrations.

With trade disputes in the past reescalating just a few days after cooling, investors should remain cautious and on high alert.

Away from trade, geopolitical risk factors in the form of Brexit-related uncertainty, heightened political risk in France, Italy’s budget feud and fears of plateauing global growth will remain on the minds of many investors.

In the currency markets, the Dollar’s upside is seen losing steam if risk sentiment continues to improve while appetite for the Pound is poised to diminish further on Brexit-related uncertainty. With Gold supported by speculation of the Fed taking a pause on interest rates next year, the nearterm outlook points to further upside.

Focusing on the global stage, it will be a relatively quiet start to the week data-wise, moving to an extremely jam-packed trading week. Inflation figures from the United Kingdom may garner some attention on Tuesday with investors assessing to see whether a weaker Pound has translated to rising inflationary pressures.

There will be a special Wednesday’s FOMC meeting focus which on

is expected to conclude with a rate hike. With investors questioning whether the Federal Reserve will take a pause on rate hikes next year, Fed Chairman Jerome Powell’s press conference will be closely scrutinised for clues on the Fed’s monetary policy path.

The Bank of Japan and Bank of England policy meetings will take place on Thursday with both central banks expected to leave policy unchanged. With Powell testifying to Congress on Friday and USD GDP data scheduled for release on the same day, the upcoming trading week is positioned to be one to remember.