Good morning,
The ongoing US/China dispute has seen its ups and downs this week, hitting hard with the recent blacklisting of Chinese companies and yielding a strengthening USD as a result of this. Discussions continue today with a good chance of optimistic negotiations being anticipated regardless of the aggressive actions previously taken. A “currency pact”, which has been discussed previously, may potentially be resuscitated according to a Bloomberg article, with the tariff increase next week possibly being suspended.
Stock markets have risen on this narrative and markets will track accordingly, as the impact of trade discussions between the two powerhouse economies can’t be underestimated around the globe.
Progress with the trade deal will likely see investors’ money move back out of the haven currencies, namely the Swiss Franc and Japanese Yen if the past is anything to go by.
As things progress forward with the trade deal and this blurry filter masking the global economy clears, markets will start to take stock of the more predictable analysis and the US growth cycle. Historically, following a central bank tightening cycle, the US economy slows, with predictions of a bottom in late 2020 according to UBS. Forward pricing is likely to be under tight scrutiny around this time period.
In the Eurozone, a leak of the ECB committee advice around the recent quantitative easing restart has unearthed Draghi’s decision to ignore officials recommendations on the matter.
The EURUSD hasn’t particularly found negativity from this – there has been in fact a move up above the 1.10 mark this morning, as positivity around the global market tailgates the US/China discussions.
Brexit, as ever, is moving on a day to day basis, with the pound primed to fluctuate on key developments emanating from both sides of the negotiation. Johnson meets the Irish leader Varadkar today, who has publicly expressed his doubts around reaching an agreement before the October 31st Deadline. Volatility is likely to ensue.
Some UK market data on industrial production and GDP will be out this morning 09:30. No growth is expected here so it may inject some tremors in the GBP if we diverge.
Outside the majors in the G10, Nordic Inflation data from Norway and Sweden saw a positive print this morning. These are important readings particularly for the Swedish central bank outlook for its monetary policy.
Have a great day ahead.