US Open – China Strikes Back, EZ PMIs fail to excite markets, Oil rallies, Gold steadies

Deteriorating US-Chinese relations sent European stocks and US futures lower, extending losses after Thursday’s selloff of big-tech stocks.  China ordered the US to close their consulate in Chengdu, in what will not be the last tit-for-tat response in this crumbling relationship.  Risk appetite is running out of steam as virus worries persist, it seems impossible to be constructive on China or the US, and as Congress might struggle to wrap up the coronavirus relief bill before benefits expire this month. 

Stocks did get a boost following strong European PMI readings, but a return to growth could be short-lived if the rest of the world continues to struggle. 


The dollar’s slump is not ending anytime soon as negative real rates in the US make it a lot more attractive to ride the European rally or economic growth recovery trade that will boost commodity currencies across the board.  The euro and commodity currencies are softer mainly on profit-taking this morning.  Next week’s Fed decision could keep the dollar slide going as policymakers might signal more action is needed. 


Crude prices are rising after impressive European PMI data suggests crude demand should improve as the region moves back into expansion territory.  Oil is also getting a boost as supply disruptions seem likely as the Atlantic hurricane season heats up.  Tropical Storm Hanna is strengthening off Texas and tropical storm Gonzalo is brewing in the Caribbean. 

WTI crude’s tight range is likely ending now as the latest move in Treasuries could spark a broader move across all asset classes.  The risks seem to be growing to the downside for crude and any rallies that do not stem from any major production outages could be short-lived. 


Gold still has its eyes set on record highs as central banks will accept the call for more action.  Gold prices are taking a breather following impressive European PMIs and as investors focus on the upcoming Fed policy meeting next week.  The Fed could be the catalysts next week to help gold clear the $1900/oz level.  If policymakers unveil plans to deliver longer-run support to the economy as growth stalls. 

Geopolitical tensions continue to percolate and that is also providing another layer of support for higher gold prices.  Relations between the world’s two largest economies won’t head towards a messy divorce, but they can get a lot worse from here.

Gold volatility will remain high as it seems a major correction could be in the cards once it reaches record high territory.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya