Trade Tribulations Pressure Markets, Central Bank Decisions Next

Headlines on trade continue to dictate intraday market moves but optimism on China may be fleeting. The US dollar is lagging while the AUD leading the wway after this morning’s jobs report. Later we’ll see today’s ECB and BOE decisions.

Trade Tribulations, Decisions Next

Risk trades initially rallied on a WSJ report that US officials had reached out to China to set up a fresh round of trade discussions. USD/JPY climbed and equities in the US and China jumped.

The moves proved to be fleeting. The main reason was that the overture for the talks came from Treasury Secretary Mnuchin. He’s a China dove and has been trying to patch together talks for some time but the thinking is that he’s a minority in Trump’s cabinet and that the bulk of the team wants to take a hard line.

Other reports says Trump had planned to announce the tariffs this week but his plans were delayed by the hurricane that’s heading towards the US east coast. Keep an eye on the 7.0 level in USD/CNY. Any rebound towards 6.90 would reflect deteriorating chances of a deal between the US and China.

Separately, NAFTA talks continue to drag on. The Canadian dollar was lifted by a comment from Mexico’s Guajardo that he sees a high probability of a deal. Certainly the signs are pointing in that direction but a Reuters source report said the most-optimistic timeline for an announcement isn’t until next week and that dairy remains a sticking point.

Now it’s on to the ECB and BOE decisions. A report from Bloomberg said the ECB will trim its growth forecasts but that will not stand in the way of plans to terminate the remaining taper in December. We’ll be watching for any signals about rate hikes around this time next year.

As for the BOE, this is the first meeting after the hike last month so any changes are unlikely and a vote of 9-0 is expected.

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