US markets gained ground overnight as reports hit the market the US treasury could be considering easing tariffs on China. The department has since denied this but signs that concessions could be made have been well received by the market with the major US indices all finishing the day nicely in the black. More dovish sentiment from the Fed, this time from FOMC voting member Charles Evans, also helped with the positive move in global equities. The pound managed to drive above the 1.3000 level against the greenback for the first time in two months as opposition leader Jeremy Corbyn advised that a second referendum is still an option on Brexit.
We look set for a positive end to the trading week in terms of investor sentiment although the headwinds to continued moves to the topside still remain and any changes to the status quo could see markets take a hit, especially as liquidity thins towards the end of the day. Probably top of the list for potential volatility is still the pound and any developments on Brexit, last nights strong rally could easily be wiped out with any comments pushing towards a hard exit and sterling traders will be more than aware of this. The global trade situation is clearly still dominating sentiment and anything new on that front could spark a move either way, rhetoric seems to have been more positive over the last few days but this could swiftly change and investors will still be positioning themselves accordingly until we get more clarity on the path forward.
In terms of fundamental data releases its another quiet day in Asia with the G20 meeting ongoing in Tokyo. In the London session we have the latest Retail Sales data with market expectation for a drop of 0.8% mom, once again though expect any Brexit developments to dominate that market. The focus will move to Canada on the New York open with CPI data due and later in the session we’ll hear from the FOMC’s John Williams before the release of the latest University of Michigan Consumer Sentiment data.