US-China Phase I Trade Deal Signed, Execution & Phase II Negotiations the Next Focus while the Dollar Await Retail Sales

Daily Update - 16th January 2020

Yesterday’s Market

• GBP Consumer Price Index 

Yesterday’s Focus

The euro strengthened against the U.S. dollar on Wednesday,  after the United States and China signed a deal to de-escalate their trade war. The U.S.-China Phase 1 agreement, marks the first step toward ending a damaging 18-month trade dispute between the world’s two largest economies. Beijing and Washington touted the “Phase 1” agreement as a step forward after months of start-stop talks, and investors greeted the news with relief. The two countries announced an initial trade deal on Wednesday that will roll back some tariffs and boost Chinese purchases of U.S. goods and services, defusing an 18-month conflict between the world's two largest economies. The euro was up 0.20 percent at $1.1150. 

The dollar declined against the safe haven currencies, as signing of a preliminary U.S.-China trade deal increased demand for safe haven yen.  Sterling fell after data showed UK inflation rose at its weakest rate in three years, ramping up expectations of a rate cut from the Bank of England at its January meeting. Consumer prices rose at an annual rate of 1.3% in December compared with 1.5% in November, marking the smallest increase since November 2016. This compared with analyst expectations for a rise of 1.5% rise Bank of England governor Mark Carney, hinted they could vote for a rate cut unless economic data improves significantly, 

 

Today’s Market

• German Consumer Price Index 
• US Retail Sales

Today’s Focus

It’s a particularly quiet day on the Eurozone economic calendar, with finalized German inflation figures due out of the Eurozone.Minor stats including car registration figures for France, Germany, and Italy could draw some attention later this morning, however. While the ECB is also due to release its meeting minutes later today, few surprises are expected. The lack of major stats will leave the majors in the hands of geopolitics and economic data from the U.S.

On the data front, the Philly FED Manufacturing Index and U.S retail sales numbers will provide direction later in the day. Sentiment towards the U.S – China trade deal will continue to influence after Wednesday’s signing. Tariffs that will remain throughout the year will continue to impact trade and the Chinese economy. The one-sided agreement that forces China to crank up U.S agri imports could ultimately lead to noncompliance…  For now, however, the good news is that both sides found common ground to close out phase 1.