With the exception of some strong buying of Sterling it had been another uninspiring session until late in the US day, when a press report suggested that the US is considering lifting some China tariffs in an attempt to break the trade stalemate. The report was then dialled back by a Treasury official who said that no recommendations had been made on tariffs. Until the press report, most currency pairs, commodities and stock markets had been trading pretty much unchanged from this time yesterday, although the news headline saw the Aud and Kiwi both jump by around 50 pips before sharply reversing much of their gains once the denial came through. US$Jpy also broke above the strong resistance at 109.00/10 to finish the day near session highs of 109.40. US Stock indices also moved up by around 0.5% on the headline while WTI was also slightly stronger. US yields remained firm with the 10Y yield @ 2.74%.
For its part, Cable rose to a two-month high against both the dollar and the Euro, extending its recent gains on growing optimism that the UK can avoid a no-deal Brexit. A multitude of options remain on the table as to how Brexit will unfold, including a general election or a second referendum vote, but traders seem to believe that the risks of a hard, no-deal Brexit have receded considerably despite the headlines.
Friday will have a bit of secondary data to get through but nothing that is likely to move the FX markets too far. Of more importance will be any political headline and also the ongoing US corporate reporting season, which may again underpin the stock markets.
The session kicks off with the NZ Business PMI and the Japan inflation data for December. Europe will see the November EU Current Account and the UK December Retail Sales, while the US will have the December Industrial Production, Capacity Utilisation, the January Michigan Consumer Sentiment Index and a speech from FOMC member Williams.
Economic data highlights will include:
Fri: NZ Business PMI, Japan National CPI, EU Current Account, UK Retail Sales, US Industrial Production, Capacity Utilisation, Wholesale Inventories, Michigan Consumer Sentiment Index
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