From the FXWW Chatroom – Trade optimism likely to unwind – Optimism on a potential trade agreement between the US and China looks likely to unwind. To the extent that expectation for greater signs of cooperation between the two powers has helped to fuel strength in risky assets there may now be danger for a reversal in the run-in to the G20 meeting. This follows signs of a continued gulf between the US and China evident in speeches by Vice President Pence and President Xi at the APEC Summit, where leaders were unable to agree on a statement.
More broadly, the dispute between the US and China is increasingly about geopolitics as opposed to trade specifically, so it may be more difficult to find common ground. This comes at a time when the US administration may be forced to lean more heavily on trade policy given limited freedom on domestic issues.
Potential for thin markets ahead of the US Thanksgiving holiday and propensity for investors to more broadly unwind exposure approaching the end of the yearn amid recent poor returns could exacerbate response to any disappointment around trade
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