The United States and China on Friday said they made progress in trade talks boosting trade optimism. But, market participants remain concerned about a slowdown in the U.S. economy.
The Fed cut interest rates this week for the third time this year putting pressure on the U.S. dollar. But it indicated further reductions were unlikely unless the economy takes a turn for the worse. Investors do not share the Federal Reserve’s confidence in the economic outlook due to the protracted trade war.
The United States and China on Friday said they made progress in talks aimed at a nearly 16-month-long trade war easing. U.S. officials said a Phase-1 deal could be signed this month boosting trade optimism. The key date in focus is Dec. 15, when new U.S. tariffs on Chinese imports are due to kick in.
Further, markets took optimism from economic data last week that eased apprehensions of a slowdown. In the latest addition, U.S. job growth slowed less than expected in October.
On the Brexit front, just over five weeks left until the UK heads to the polls on Dec. 12. The Conservative party holds a lead in the polls and the risk of a hard Brexit is considered to be reduced. However, plenty of developments in the election campaign are likely to happen, which could mean volatility for the British currency.
The EUR/USD jumped 1.0% last week, resuming its winning ways.
Dollar/Yen had its first losing week since the end of September. The Japanese currency ended the week with strong gains. Investors will be keeping an eye on the Bank of Japan minutes.
GBP/USD gained close to 1.0% last week, erasing most of the losses of the previous week. This week features construction and services PMIs and the Bank of England rate decision. Sterling-dollar implied volatility gauges with a one-month maturity, which fell in October, have started to rise again.
Spot gold rose 0.5% on a weekly basis, after a 1% gain the previous week.
START TRADINGLQDFXperts – The week ahead – Trade optimism boosts appetite
- On Monday (04.11) the new President of the European Central Bank (ECB) Christine Lagarde will be giving her first speech in the role. Markets expect she will stick to an easy policy script left by her predecessor, Mario Draghi. Markets are likely to remain volatile during her speech as traders try to understand the direction of interest in the near future.
- On Tuesday (05.11) the Reserve Bank of Australia will be holding its monetary policy decision. Experts expect that the central bank will keep interest rates unchanged at this week’s meeting at 0.75%. Also, Canada Trade Balance will be released.
- On Thursday (07.11) the Bank of England’s monetary policy committee will hold its meeting. Analysts expect that BoE will hold rates steady, although there is some speculation that it might drop its tightening bias. The BOE is mostly projected to maintain the benchmark rate at 0.75%. Investors will also be interested in the BoE’s quarterly inflation report.
- On Friday (08.11) Canada will be releasing its monthly labor market report this Friday. Canada’s labor market has been exceptionally strong in the past few months especially in job creation. The unemployment rate still remains near historical lows. The BoC voted last week to keep interest rates steady but forecast that growth could slow.
Follow this week’s economic calendar.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, CNBC, FX street
Photo: LQDFXperts Weekly Highlights Positive trade mood boosts appetite