• US Dollar may extend losses due to US/China relations

    Wall Street stocks ended on an upbeat note, with the Dow Jones, S&P 500 and Nasdaq indices closing 0.43, 0.74 and 1.67 percent higher, respectively. Technology stocks led the way, which helps explain why the tech-leaning Nasdaq index was the best performer relative to its peers. The so-called FAANG group – Facebook, Apple, Amazon, Netflix and Google – were all up for the day.

    Gold prices hit an all-time high at $1945.63 per ounce on Monday. The precious metal’s appeal has been rising in tandem with future inflation expectations from both monetary and fiscal stimulus policies. See my weekly XAU/USD outlook here for more.

    US Senate Republicans also revealed more details about another coronavirus relief bill which includes an additional $1,200 stimulus check. This may have contributed to gold’s rally if the news put a premium on anti-fiat hedges. Follow me on Twitter @ZabelinDimitri for more updates on key geopolitical risks impacting markets.

    Foreign exchange markets also reflected a risk-on tilt, with the haven-linked US Dollar and anti-risk Swiss Franc as the session’s biggest losers. The Swedish Krona was crowned champion, with the Norwegian Krone and Euro not far behind. The latter’s rally – as mentioned below – appears to be the result of optimism about greater EU integration at a time when the Eurozone’s existence was standing on the precipice.

    TUESDAY’S ASIA-PACIFIC TRADING SESSION
    A relatively sparse data docket puts macro-fundamental themes in the spotlight. Persistent optimism about economic stabilization and stimulus from the Fed and federal government may compound USD weakness. Consequently, this may then push US Dollar-denominated commodities higher and put a premium on cycle-sensitive assets like the Australian and New Zealand Dollars. This dynamic may also push gold prices higher.

    US-China geopolitical tensions continue to rise amid the coronavirus pandemic that widened the rift in what was an already-strained relationship. After closing the Chinese consulate in Houston, Beijing responded by alerting American diplomats in Chengdu that they have 72 hours to clear the residence. Despite these developments – and what that could lead to – markets appeared to be unbothered.

    EUR/USD ANALYSIS
    Propelled in part by US Dollar weakness, EUR/USD has surged over 9 percent since mid-May and is now trading at September 2018-highs. The next obstacle to clear may be the September swing-high at 1.1815, which also marked the start of what would become a multi-month downtrend. Looking ahead, USD weakness, combined with Euro strength – following the successful EU summit – may push EUR/USD higher.

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  • China takes over U.S. consulate premises

    China said it had taken over the premises of the U.S. consulate in the southwestern city of Chengdu on Monday after ordering the facility be shut in retaliation for being ousted from the Chinese consulate in Houston, Texas.

    Police in Chengdu restricted access to the area around the consulate on Monday morning, and four officials in personal protective gear were seen walking towards the consulate at about 10:24 a.m. local time (0224 GMT).

    China’s Ministry of Foreign Affairs said the consulate was closed as of 10 a.m. It said later that authorities entered the building and took over the premises.

    China ordered the closure of the facility on Friday after Washington last week gave China 72 hours to vacate its consulate in Houston, in a dramatic escalation of tensions between the world’s two largest economies.

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