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Huge Market Volatility Expected with all Focus on Trump Press Conference on China



All eyes are on U.S. President Donald Trump today, who last night announced that he is holding a press conference “on China”.


It comes after China’s parliament approved a decision to move forward with national security legislation for Hong Kong. China detailed that the legislation is aimed at tackling; secession, subversion, terrorism and foreign interference in the city but the plan, which have triggered big protests in Hong Kong.


Last week, China did note of its intentions to implement this legislation, which fired up the U.S. Trump and his administration did warn China if they did this, a response was going to be seen, talking of potential sanctions. The world's top two economies have been back and forth with heated rhetoric over the last few weeks now.

What does this mean for the market?


Outside of the U.S. and Chinese tensions, markets were looking increasingly optimistic, about an economic rebound. As several countries were easing lockdown measures and getting the economy started again, which prompted much market risk appetite.


However, depending on the severity of Trump’s actions announced regarding China today, this would invite renewed risk-off trading. It would support a potential USD recovery, flows in JPY, CHF and Gold, the traditional safe-havens. The most hard-hit in riskier FX would likely be GBP as historically is in times of economic/geopolitical crisis, AUD and NZD, given their economic ties to China.


*Do not today is month-end, which has been tilted towards USD strength and does make conditions greatly more choppy.

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