Attention on the future of U.S.-China relations as the U.S.-China agreement is signed! “Key points and event schedule for the week of January 13”
Last week, Iran retaliated against the United States, and it seemed possible that direct military conflict with the U.S. could unfold, but it was narrowly a avoided.
In an unexpected turn, risk-off positions were pushed higher as the market rapidly shifted to a risk-on regime.The market suddenly changed sentiment.
However, since the Middle East risk still remains a tinder, personally I feel a slight sense of discomfort about such a full-on risk-on rally.
After a tumultuous start to the year, with calm returning, this week I would like to reassess the directions for the future.
◎ This Week's Points of Attention
1) U.S.-China Relations
The weekend saw Taiwan's presidential election, with incumbent Tsai Ing-wen (pro-democracy) defeating a pro-China candidate.
China does not recognize Taiwan as an independent country, and Xi Jinping has stated peaceful unification with Taiwan as the baseline, though he would not hesitate to use force; the election results may act as a trigger for heightened tensions in the China-T Taiwan relationship.
Additionally, the United States treats Taiwan as an independent country and exports arms to it.
The U.S. extended congratulations on Tsai's re-election.
Regarding Hong Kong protests and the Xinjiang Uyghur Autonomous Region, U.S. Congress has passed human rights legislation, which China has criticized as interference in internal affairs.
With U.S.-China relations currently cooling, there is attention on whether Taiwan will become a trigger for renewed U.S.-China risk.
This week also includes the signing ceremony for the first phase of U.S.-China talks; Deputy Prime Minister Liu will visit the U.S. for the signing on the 13th.
I will watch for developments on the second phase of U.S.-China talks, and any mention of Taiwan, Hong Kong, Xinjiang, or sanctions on Huawei, etc.
2) Middle East Risk
Since the start of the year, U.S.–Iran risk has cooled, and markets have tilted toward risk-on sentiment.
Both President Trump and Iran's leadership have saved face by engaging in attacks, and both seem unlikely to pursue further military conflict at present.
However, Iran's admission of shooting down a civilian airliner has sparked a ripple effect.
The airliner carried many Canadian passengers; Canadian Prime Minister Trudeau states Iran must be held fully responsible.
Ukraine, which was the victim, is also seeking compensation from Iran.
Within Iran, protests against the leadership have erupted, and President Trump has tweeted support for the protests.
Iranian authorities temporarily detained the British ambassador for inciting protests.
British Foreign Secretary James Cleverly has condemned it as a flagrant violation of international law in a statement to Iran.
Additionally, near U.S. military bases, there have been confirmed rocket strikes.
If there is any incident causing harm to Americans, Middle East risk will remain a tinderbox, so continued caution is warranted.
3) Economic Indicators
This week, inflation indicators will be released in Europe, the U.S., and the U.K., focusing on important data.
These are key indicators that can influence monetary policy; with risk-off factors waning, attention is likely to focus on monetary policy.
Turkey will also publish its policy rate.
Since the start of the year, the Middle East risk has made the Turkish lira unstable.
There is a conflict between President Erdogan and the central bank over policy rates.
Pay attention to the policy rate announcement and the lira.
◎ This Week's Event Schedule
Monday, January 13
18:30 GBP U.K. GDP
Tuesday, January 14
00:00 USD Rosengren and Boston Fed President speak
02:40 USD Bostic, Atlanta Fed President speaks
04:00 USD Monthly Budget
12:00 CNY China Trade Balance
17:30 EUR ECB's De Guindos speaks
22:30 USD CPI (Consumer Price Index)23:00 USD Williams, NY Fed President speaks
Wednesday, January 15
U.S.-China Phase 1 Agreement Signing Ceremony
03:00 USD Daly, Kansas City Fed President speaks
09:30 JPY Kuroda, BoJ Governor speaks
16:45 EUR France HICP (Consumer Price Index)
17:00 EUR Spain HICP (Consumer Price Index)
17:30 SEK Sweden CPI (Consumer Price Index)
17:40 GBP Saunders, BoE external member speaks18:30 GBP U.K. CPI (Consumer Price Index)
22:30 USD PPI (Producer Price Index) and NY Fed Manufacturing Index
Thursday, January 16
00:30 USD Crude Oil Inventories
01:00 USD G. M. M Mercantile President speaks02:00 USD Kaplan, Dallas Fed President speaks
03:00 EUR Weidmann, German Bundesbank President speaks04:00 USD Beige Book (Beige Book)
16:00 EUR Germany HICP (Consumer Price Index)
20:00 TRY Turkey Policy Rate Announcement21:30 EUR ECB Monetary Policy Meeting Minutes (Dec 12)
22:30 USD Retail Sales and Williams, NY Fed President speaks
Friday, January 17
00:00 USD Bowman, Fed Governor speaks
03:00 EUR Lagarde, ECB President speaks
06:30 NZD New Zealand Manufacturing PMI
11:00 CNY China GDP
18:30 GBP U.K. Retail Sales
19:00 EUR Italy HICP (Consumer Price Index)
19:00 EUR Euro Area HICP (Consumer Price Index)
22:30 USD Building Permits
23:00 USD Williams, NY Fed President speaks
Saturday, January 18
00:00 USD University of Michigan Consumer Sentiment Index
02:45 USD Quil Hollies, Fed Vice Chair speaks
03:00 USD Baker Hughes Rig Count
