China Trade Deal

China Trade Deal and Fed Meeting Shake Investors Confidence

Investors remain focused on the US-China trade relations, as well as yesterday’s publication of the minutes of the last meeting of the US Federal Reserve. Today, the market received mixed signals about trade negotiations. Reuters reported that the conclusion of the first stage of the trade deal could be postponed to next year due to the reluctance of the US administration to cancel tariffs on Chinese exports. However, the representative of the Ministry of Commerce of China, Gao Feng, said that the negative “external rumors” about the negotiations are inaccurate, and both sides maintain close contacts. In support of Gao Feng’s words, The Wall Street Journal, citing its own sources, reported that Chinese Deputy Prime Minister Liu He invited US Trade Representative Robert Lighthizer and Finance Minister Steven Mnuchin to arrive in Beijing for a new round of negotiations.

Fed protocols have confirmed that the regulator does not see the need for further cuts in rates if current economic conditions do not change significantly. Most members of the FOMC consider the reduction already undertaken sufficient to maintain the prospects for moderate economic growth, a strong labor market, and maintaining inflation near the target level of 2.0%.

Eurozone

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Today, the is euro weakening against the pound but is strengthening against the yen and the dollar.

Investors are focused on the publication of the minutes of the last ECB meeting, which, however, did not say anything new to market participants. The regulator expects key interest rates to remain at their current or lower levels, until inflation steadily rises to 2.0%. The purchase of assets in the amount of 20 billion euros, launched on November 1, will also be valid for a long time and will be canceled only shortly before the start of the ECB rate hike.

United Kingdom

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GBP is strengthening today against its main competitors – EUR, USD, and JPY.

In the absence of significant economic releases, investor are focused on parliamentary elections, which should remove Brexit uncertainty. Today, Labor leader Jeremy Corbin unveiled the party’s election manifesto. Among the election promises, one can single out giving EU nationals living in UK the automatic right to stay and the introduction of additional taxes for oil companies. A number of observers believe that the implementation of this plan will damage the oil industry in Scotland and put pressure on the British economy, which is already experiencing losses due to Brexit. We also note that experts from the Organization for Economic Co-operation and Development (OECD) believe that UK GDP growth rates could slow down to 1% next year, even if the new Parliament approves a deal agreed by the EU and Boris Johnson.

Japan

The yen is now strengthening against the euro and the pound and shows ambiguous dynamics with the dollar.

In the absence of important macroeconomic releases, JPY movement is of technical nature. We only note that the ruling coalition of the Japanese parliament demanded an increase in the budget expenditures by USD 92 billion in order to put the economy on a path of sustainable growth. However, experts doubt the prospects of these requirements, since Japan’s public debt is already double the size of its economy at USD 5 trillion, and new costs can become unbearable for it.

Australia

The Australian currency today generally strengthens to its main competitors – the pound, the euro, the US dollar, and the yen.

In the absence of important macroeconomic releases, AUD is trading under the influence of technical factors. We only note that, according to the OECD experts, as reflected in a report released today, the Australian economy is weakening as households suffer from slow wage growth and high taxes. The OECD supported the introduction of lower rates and called for increased government spending to support the economy.

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