Weekly Market Wrap 10/01/2020-17/01/2020

Marius Paun | London, UK | Senior dealer | Friday, 17th January 2020

‘Habemus’ (we have) phase one trade deal!

Finally, the US and China signed the Phase 1 trade deal in the presence of President Donald Trump and Vice-Premier Liu He during a ceremony in Washington on Wednesday. China agreed to buy an additional $200 billion of US goods over the next two years, spread over agriculture, energy, manufacture and services sector. And the concession from the US was to stop calling China a currency manipulator and agree to halve some of the new tariffs. However many other tariffs will remain in place and will be subject to Phase 2 talks. The good feel factor has supported the US indices which have made fresh all-time highs every day this week.

Meanwhile, China trade balance for December surpassed expectations, raising $329 billion. At the same time, fourth-quarter GDP came in line with consensus at 6%. Although it’s the slowest growth rate for 29 years it was considered more of a sign of economic stabilization given the trade dispute with the US for the past 18 months.

It appears there is a growing sentiment in the UK, leading to the possibility that the monetary policy could be eased. As such, Bank of England member Vlieghe has already expressed his support for an interest rate cut, adding that he needs to see ‘a significant improvement in the data to justify waiting’. The markets took notice and the pound sterling found itself under downside pressure. Friday morning the retail sales figures were released and they disappointed, coming in at -0.6% versus expectations for a 0.5% rise. GBPUSD was trading around 1.3030 towards the end of the week after dipping below 1.30 midweek.

Back in Europe, Germany posted its inflation figures which showed a rise of 1.5% year on year, in line with market expectations. The European Central Bank aims to keep inflation below, but close to, 2% and the general outlook is that inflation in the euro area could struggle in the Gold, coming months. The euro is on course to end the week lower against the US dollar dipping below 1.11 mark.

Elsewhere on the Brexit front, the Irish deputy Prime Minister expressed doubts that a trade deal between the UK and EU can be done this year. Pushing things even further, the Croatian PM threatened to block UK access to common area markets. Despite all this, the British Prime Minister, Boris Johnson, is adamant about a ‘comprehensive EU trade deal done by year-end’. We should have an interesting year on the old continent, particularly on the political scene!!!