Trade Talks Are Set to Resume Today – Expect some Vol

Economic data will likely take a backseat once more, with the U.S and China set to resume trade talks today. Updates from talks will drive the markets today.
Bob Mason
USA/Chinese Flag - Old Exective Office Building, Washington, D.C.

Earlier in the Day:

It was a relatively quiet day on the economic calendar through the Asian session this morning. April house price figures out of the UK and China inflation numbers were the only stats for the markets to consider.

Out of China,

The annual rate of inflation accelerated from 2.3% to 2.5% in April, which was in line with forecasts. Month-on-month, consumer prices rose by 0.1%, which was also in line with forecasts. In March, consumer prices had fallen by 0.4%.

Wholesale price inflation also accelerated, with the producer price index rising by 0.9% in April, year-on-year, following a 0.4% rise in March. Forecasts were for wholesale prices to rise by 0.6%.

While inflation numbers were positive, new loans disappointed in April. New loans stood at CNY1,020bn, coming up short of a forecasted CNY1,200bn. In March, new loans stood at CNY1,690bn.

The Aussie Dollar moved from $0.69765 to $0.69786 upon release of data. At the time of writing, the Aussie Dollar was down 0.20% to $0.6974.

Elsewhere,

At the time of writing, the Japanese Yen was up 0.15% to ¥109.93 against the U.S Dollar, while the Kiwi Dollar was down 0.03% to $0.6573.

Trade war jitters weighed on risk appetite through the session, as the markets largely brushed aside weaker than expected new loan figures out of China.

The Day Ahead:

For the EUR,

There are no material stats due out of the Eurozone to provide direction to the EUR.

Following a mixed bag of stats in the early part of the week, the focus will be on the U.S – China trade talks later today.

At the time of writing, the EUR was down 0.01% at $1.1191.

For the Pound,

It’s also a quiet day on the economic calendar, with no material stats due out of the UK today.

The lack of stats will leave the focus on Parliament and Brexit. Theresa May has made a promise of a new Brexit deal for Parliament to vote on in a couple of weeks. While that’s the good news, there’s no guarantee that Parliament will be interested in any deal that is brought to the table by the British PM.

From Parliament, Theresa May continues to lead the Tories and the UK. After rejecting calls to resign on Wednesday, the British PM now has 2 weeks to deliver. The good news for the Pound is that there’s unlikely to be a vote of no confidence between now and then. Should Theresa May fail ahead of the EU Parliamentary elections, however, it will be an altogether different story.

At the time of writing, the Pound was up 0.01% to $1.3007.

Across the Pond,

April wholesale inflation figures, the weekly jobless claims numbers, and March trade data are due out of the U.S.

While we can expect some influence from the weekly jobless claims figures, wholesale inflation numbers will likely be the key driver this afternoon.

There will be some interest in the trade data, however. The figures are due out as the U.S and China return to the negotiating table.

All eyes will ultimately be on Washington and whether the two sides can reach an agreement on trade.

At the time of writing, the Dollar Spot Index was down 0.02% to 97.604.

For the Loonie,

March house price figures and trade data are due out of Canada this afternoon. Barring particularly dire house price figures, the focus will be on the trade data.

The Bank of Canada has maintained its dovish stance and, while today’s numbers are unlikely to cause a material shift, a narrowing of the trade deficit would certainly help.

Forecasts are for the trade deficit to narrow from C$2.90bn to C$2.30bn. The numbers will need to be better than forecasted, however, for the Loonie to benefit.

Outside of the stats, the U.S – China trade talks will have a material impact on risk sentiment and crude oil prices. Positive news would be a boon for the Loonie.

The Loonie was down 0.05% at C$1.3486, against the U.S Dollar, at the time of writing.

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