Trade Tribulations, Decisions Next

Headlines on trade continue to dictate intraday market moves but optimism on China may be fleeting. The US dollar lagged while the Australian dollar led the way ahead of the jobs report later. That's followed by Thursday's ECB and BOE decisions. The English Premium video is found here. 

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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. As Ashraf reminds, 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 onto 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. Reporters will likely repeat their questions to Draghi on whether there is a chance for interest rates to rise before next summer. 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. Also note the meeting will include a new member, Jonathan Haskel, replacing Ian McCafferty, who conistently voted for rate hikes over the last year.