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CFDs and forex (FX) are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX, or any of our other products work and whether you can afford to take the high risk of losing your money.
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US-China trade war background image

Macro Digest: False stabilisation and trade wars

Macro 5 minutes to read
Picture of Steen Jakobsen
Steen Jakobsen

Chief Investment Officer

Summary:  As Chinese trade war rhetoric becomes more strident the odds of a detente being reached at next month's G20 summit have shrunk to just 50/50. The upshot may be policy moves in the US and infrastructure development programmes in China.

• The G20 meeting in Japan is a very bad place to go looking for a trade deal between China and the US (the WTO is one of the main agenda points).
• The rhetoric change in China this week takes down our 75/25 for a deal odds to 50/50. Remember: Nothing happens in vacuum in China.
• Risk is our next “inflection point” expected in July/August could move forward to just past the G20 meeting on June 28/29.
• Policy response are likely to be lower Fed policy rates in the US, infrastructure spending in China combined with much lower RRR overall. China needs jobs, the US needs growth 
• XAUCNY is the trade to watch on RISK ON/OFF – we are now long XAUCNY.

Apart from the overall more negative tone coming from trade talks we also have a keen eye on the Iran vs US escalation we are seeing. The mobilisation of US forces is significant and I for one fail to see end game from this except of course from the obvious “deterrent" Cold War script.
xaucny
Source: Bloomberg
Important links:

The G20 Summit  June 28-29.

Japanese prime minister Shinzo Abe's priorities for the Osaka Summit.

Dispute over the appointment of a WTO appellate body.

Tweets from Steen Jakobsen on the changing china rhetoric: here and here.

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