FXTM predicted that the market euphoria surrounding the US-China trade deal is set to prolong into the week ahead and provide support for Asian assets, as investors revise their 2020 outlooks on the global economy.
According to Han Tan, a market analyst in FXTM, investors are aware that the economic readings due in the coming days are backward-looking, but will still form the base for how much the global economy can take advantage of the US-China trade deal.
“Given the buoyant mood in the markets, any disappointing economic data releases out of major economies in the week ahead will likely be overshadowed by the feel-good factor stemming from the trade deal,” said Han.
Han further explained that the Bank of England is expected to leave UK interest rates unchanged this week, despite the UK election risk having now passed. Still, the UK economy, and the Pound by extension, are not out of the woods yet, considering that the UK must use the year ahead to formulate its future relationship with its largest trading partner, the European Union through most of 2020. That political process implies that Sterling is due for another bumpy ride throughout 2020.
Meanwhile, Malaysia’s November CPI reading is expected to paint a stable inflationary picture, with markets expected a print of 1.1 percent.
“Should downside macro risks subside meaningfully going into 2020, coupled with the Federal Reserve’s indicated stance that it will leave US interest rates unchanged for the year ahead, that could mitigate the policy easing bias among central banks across Asia,” Han added.
For the week ahead, a sustained risk-on mode in the markets could see USDMYR testing the 4.12 support level, followed by stronger support at the 4.10 mark. The immediate resistance level can be drawn at the 4.17 line, which is also where the currency pair’s 50-day moving average currently resides.