The lack of movement belies sentiment in the market
At first glance, you would think that the currencies market is sleeping once again with almost no change observed across the board. Dollar pairs are <0.1% changed, keeping within 10 pips of their closing levels yesterday.
However, that doesn't tell the whole story as earlier we had the yen gain while risk currencies fell amid more cautious/defensive flows thanks to softer US-China trade headlines.
But that has been counterbalanced by China's Liu He, who said that they remain "cautiously optimistic" about a trade deal still - though noting that they are "confused" by demands from the US camp currently.
That helped to see risk trades pare losses and alas, here we are.
I still think that the market should heed the ominous signs that things could potentially fall apart and that those risks are currently quite underpriced.
However, given how easily market participants are lapping up the comments by Liu He, it's also another sign that this is a market that will just about buy anything and cling on to any signs of hope - no matter how small it may be.
Looking ahead, it's still all about the US-China trade rhetoric as that will continue to be the key factor driving the ebb and flow in the market today.
