23/ 12/ 2019

Week Ahead | Stats are Lighter as Holiday Mood Kicks In

Markets remain quiet overall, very much in holiday mood. Dollar and Canada are the weaker ones. US President Donald Trump’s tweet late Friday indicated that US-China trade deal is still on the right track. He said that he “had a very good talk with President Xi of China concerning our giant Trade Deal.” He noted that China has already started “large scale purchases” of US farm products. Formal signing of the agreement is “being arranged”. Both presidents also discussed the issues of North Korea and Hong Kong. While Trump is due to travel to Switzerland for the annual World Economic Forum in Davos at the end of January, Xi is not expected to be there. Hence, it’s an unlikely location for the signing. According to comments from US Trade Representative Robert Lighthizer, the 86-page trade agreement would be signed by him and Chinese Vice Premier Liu He in early January in Washington. The agreement is expected to come into effect 30 days afterwards.

The economic calendar for the week is ultra-light, as most centers are on holiday on Wednesday and Thursday. US and Canadian data will be the main focuses on Monday, with durable goods and GDP. Japan will be a focus with BoJ minutes, summary of opinions and some data featured. Eurozone will also release ECB bulletin on Friday.

18/ 12/ 2019

Pound Traders Give Thumbs Down to Johnson’s New Brexit Strategy

A number of good news has increased optimism over China. Following announcement of a Phase I trade deal with the US, the latest set of economic data surprised to the upside in November. However, we expect the bullishness will be short-lived. For the year ahead, the government will have to continue stimulating the economy via fiscal and monetary measures.

Yesterday, the euro was little changed against the dollar, as investors adjusted their previous position after British Prime Minister Boris Johnson put a no-deal exit from the European Union back on the table. Britain on Tuesday set a hard deadline of December 2020 to reach a new trade deal with the EU, trying to pressure Brussels to move more quickly to seal an accord. 

Sterling’s pull back extends deeper today on renewed Brexit concern. Setting a hard deadline of December 2020 for trade negotiations UK and EU could create another Brexit cliff-edge. 

It’s a busier day on the economic calendar, which should provide some direction, though ultimately, the focus will likely remain on UK Parliament.

17/ 12/ 2019

Economic Data and Brexit in Focus

The euro edged higher against the dollar yesterday, as dollar dipped in anticipation of further details on the U.S.-China trade agreement. U.S. President Donald Trump’s top trade negotiator, Robert Lighthizer, praised a “phase one” U.S.-China trade deal which is expected to nearly double U.S. exports to China over the next two years, while China remained cautious ahead of the signing of the agreement. The euro, which had spiked to a four-month high of $1.1199 against the dollar on Friday, retraced most of those gains, it was last trading at $1.1152.Sterling strengthened against greenback, as sterling was bolstered by expectations that last week's resounding election win for British Prime Boris Johnson's Conservative Party will end near-term Brexit uncertainty. Over the weekend, Conservative politicians repeated their pledge to bring the UK out of the European Union by Jan. 31 and reach a new trade deal with the EU by the end of 2020. The pound rose by as much as 0.7% versus a slightly weaker dollar in early US trading, last up 0.1% at $1.3346.

It’s a quiet day ahead on the Eurozone economic calendar. October trade data from the Eurozone will provide direction in the early part of the day. While trade data from Germany last week impressed, forecasts are for the trade surplus to narrow. An unexpected widening would be a boost for the European majors. From the U.S, housing sector numbers, industrial production, and JOLTS job openings will also be in focus later in the day.

On the geopolitical front, we’ve got Brexit back in the driving seat. The big question is whether ‘The Establishment’ will be willing to give Boris an easy ride. It would certainly send the wrong message to other member states that had previously threatened referendums.

16/ 12/ 2019

Week Ahead | Monetary Policy, Stats and an Impeachment in Focus

The markets were swayed by three key events last week, UK Election, US-China trade deal and FOMC rate decision. Sterling ended as the strongest one last week as boosted by the Conservative’s landslide victory in UK election, removing a large of of Brexit uncertainty. DCanadian ollar as partly boosted by US-China trade deal. Yen was the weakest one on strong risk appetite as US stocks extended record runs. Dollar followed as the second weakest after Fed Chair Jerome Powell dampened the chance of any rate hike soon, indicating that interest rate will stay at current level unless there is material surprise in inflation.

After a week to remember in UK politics, Lagarde’s first decision at the helm of the ECB, the last Fed decision of the year, another chapter in the trade drama, life goes on.

Apart from the reactions to previous events, final US GDP, the Bank of England’s rate decision, and a mix of data from all over the world will set the tone