Trade Tensions Ease as Negotiation Initiated

Daily Update - 27th March 2018

Yesterday’s Market

• EUR German Buba President Weidmann Speech
• US Chicago FED National Actvity Indes, Fed’s William Dudley, FOMC Member Mester, Fed’s Quarles Speeches

Yesterday’s explained

Sterling rose against the dollar on Monday as investors became more convinced that the Bank of England would raise the interest rate in May. Bundesbank president and the ECB Governing Council member Jen Weidmann said the market expectations for a rate hike for mid-2019 are not completely unrealistic, confirming his previous stance and boosting EUR short-term. Euro was also strengthened as optimism that the US and China are set to begin negotiation on trade help ease fears of a trade war and investors’ appetite for risk improved. 

The greenback was lower against majority of its peers on Monday as trade war fears eased on news that China is willing to negotiate with U.S. over the matter. Reuters reported China is willing to hold talks with the United States to resolve their differences over trade, China's foreign ministry said on Monday, as alarm grows over a possible trade war between the world's two largest economies.  US Treasury Secretary Mnuchin said he is “cautiously hopeful” that China tariffs can be avoided. New York Federal Reserve Bank President William Dudley was speaking about regulation in the banking industry. Cleveland Federal Reserve Bank President Loretta Mester expects a bit more than 2.5%GDP growth in 2018, 2019 with gradual monetary tightening this year and next preventing the economy from overheating and positions Fed better for potential risk.

 

Today’s Market

• EUR Business Climate, Consumer Confidence
• US FOMC member Bostic Speech

Today’s Focus

For the EUR, economic data scheduled for release this morning includes prelim March inflation figures out of Spain, jobseeker numbers out of France, with Eurozone private sector loan numbers and business and consumer confidence figures also scheduled for release.

While focus will be on the inflation numbers, we will expect the less material stats to also provide direction through the morning, with business and consumer confidence key to driving the economy, though the surveys may have been completed before the EU’s exemption on steel and aluminum tariffs, which could give misleading signals.

Across the Pond, key stats scheduled for release this afternoon include March’s CB Consumer Confidence figures, together with Redbook figures. Based on forecasts, the consumer confidence numbers are expected to provide the U.S Dollar with some much needed support, assuming that there is no negative news from the U.S administration later today on ongoing discussions with China on trade.

Economic data may have improved in the last week, with this afternoon’s consumer confidence figures also scheduled to be a positive, but the U.S administration’s approach to foreign policy and international relations has the markets and perhaps even the world leaders somewhat perplexed.