2022-12-15 • Updated
China may respond to US House Speaker Nancy Pelosi's visit to Taiwan with military provocations, including firing missiles near Taiwan or large-scale air or naval activities. Taiwanese and US media say Pelosi plans to visit Taipei on Tuesday night, but there’s no official confirmation. However, responding to reporter questions on Tuesday, Taiwan's Premier Su Tseng-chang said the island "warmly welcomes" any foreign guests. He added that Taiwan "would make the most appropriate arrangements" for visitors.
China's leader Xi Jinping believes in the correctness of the principle of a "united China." According to his beliefs, Taiwan historically belonged to China, so it must be returned in any way.
However, it’s not the only reason. Taiwan's electronics sector attracts the most significant share of foreign investment. Indeed, Taiwan's significance to the global semiconductor industry cannot be understated. Taiwan Semiconductor Manufacturing Company (TSMC) is the world's largest contract chip manufacturer and Asia's most valuable listed company at $600 billion. Much of the world's global semiconductor supply chain relies on Taiwan.
Taiwanese exports across the strait to mainland China were at an all-time high in 2021, but perhaps more importantly, the small island nation has China in a chokehold over semiconductors. In 2020, China spent more on importing chips than it did oil (many experts believe China is stockpiling chips).
There’s a risk that any Chinese invasion of Taiwan would damage or destroy much of the tech infrastructure China relies on to feed its electronics and manufacturing industries with crucial components. The invasion might make Taiwan's semiconductor industry the spoils of war, but, equally, the Taiwanese might be ready to destroy semiconductor plants themselves, most notably TSMC's network of advanced factories, to deprive the Chinese of some of those spoils.
Moreover, it’s questionable whether the Chinese could operate the fabs without the cooperation of the world-beating TSMC team of managers, researchers, and engineers, at least for a few years.
XAUUSD, weekly
Gold will break above $1785 and fly towards $1830 on escalation.
US dollar, daily
US dollar bounced off the local support of 105.00, and the uptrend is still valid. Any escalation will push the greenback’s index to 110.00, pressing other currencies down versus the USD.
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The upcoming August inflation data may send mixed signals. The 12-month headline inflation rate is expected to rise to 3.6%, causing concerns for the Biden administration. However, core inflation, which excludes food and energy prices, is projected to decrease to 4.3%, aligning with the Federal Reserve's goals. Past price trends influence both figures, so looking at recent data for a more accurate picture is crucial.
The odds of a final interest rate hike by the US Federal Reserve (Fed) this year have dropped after US job openings hit their lowest levels since early 2021. This has led to a correction in the US Dollar as traders reduced their bets on further rate hikes.
Here we go again, my friends. It’s time to look critically into the future of what trading opportunities September might have in store for us. As always, it is essential to note that the views expressed here are mine and should not be considered financial advice without proper examination.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.
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