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Trade war truce

Trade war truce

EU Council President Donald Tusk stated on Friday that the UK had a choice of ‘no deal’ or no Brexit if parliament rejects the current Withdrawal bill. Markets had factored in the deal being rejected and speculation around a second referendum increased. Sterling fell just below 1.2750 against a firm Dollar with month-end Sterling selling contributing, although the Euro fell back to the 1.1275 area. CFTC data recorded a small decline in bets against the Pound to just below 40,000 contracts, a four-month low, potentially increasing the risk of fresh hedge-fund selling if sentiment deteriorates further.

Labour stated that they would look to force a no-confidence vote if the Brexit deal is defeated in Parliament, with an eye to triggering a general election and uncertainty remains high. Sterling gained some support from improved global risk conditions and a weaker Dollar, although expectations of another subdued PMI reading today mean growth concerns persist.  Sterling opens at 1.1273 on the Euro and 1.12819 on the Dollar.


The Dollar remained weak this morning trading against the Euro above 1.1350. The US Chicago PMI index strengthened sharply to an 11-month high of 66.4 for November from 58.4 while delivery times continued to lengthen which suggested that activity remained strong.

Minneapolis Federal Reserve (Fed) President Kashkari stated that interest rates should not increase further in current circumstances, although he’s usually a dovish committee member.

At the weekend G20 Summit, President Trump and Chinese President Xi agreed to a truce in their trade dispute with the January increase in tariffs on Chinese imports to 25% from 10% postponed for 90 days in order for further talks to take place. China also agreed to boost imports from the US and the rhetoric triggered a significant dip in defensive Dollar demand at the Asian open despite differences in the text between the countries.

Markets will also continue to monitor Fed comments with Jerome Powell set to testify to Congress on Wednesday this week.


Eurozone CPI inflation fell to 2.0% for November, failing to meet consensus forecasts of 2.1% and the core rate declined to 1.0% from 1.1%. The data maintained speculation that the European Central Bank (ECB) would have a dovish view, especially as oil prices have dropped and the Euro gradually lost ground throughout Friday. The Euro retreated to near 1.1300 as expectations of strong month-end demand boosted the Dollar, but clawed its way back to above 1.1350 by market open this morning.

Data to Watch:

01:45 CNY Caixin Manufacturing PMI (Nov)
08:15 CHF Real Retail Sales (YoY) (Oct)
08:55 EUR Markit Manufacturing PMI (Nov) (Germany)
09:00 EUR Markit Manufacturing PMI (Nov)
09:30 GBP Markit Manufacturing PMI (Nov)
14:30 CAD Markit Manufacturing PMI (Nov)
15:00 USD ISM Manufacturing PMI (Nov)
15:00 USD ISM Prices Paid (Nov)
15:30 USD FOMC Member Brainard Speech
17:30 GBP MPC Member Haldane Speech
18:00 USD FOMC Member Kaplan Speech

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