Investor sentiment continues to move higher as news on the trade negotiations between the US and China continues to look positive. President Trump yesterday tweeted that “talks with China are going well!” which has helped buoy market expectations that there will be a distinct warming in relations between Beijing and Washington which will help to promote global growth. The stock markets were the main beneficiaries with most of the global indices finishing their days well in the black. The positive enthusiasm didn’t filter through to all markets with currencies in particular having a very quiet day as ‘risk on’ trades failed to make further gains and the dollar clawed back some of its recent losses. Oil continued to grind higher with WTI sitting just south of $50/b and Brent around $58/b.
Geo-Political issues look set to dominate market direction as we move through the first weeks of the new trading year and although things are looking brighter on the trade front now than they were a few weeks ago, investors are still in a cautious frame of mind. We’re set to hear from President Trump later today on the contentious Mexican Wall and although it probably won’t have the same degree of impact on the market as the Chinese trade situation, any sign of any agreement with the democrats could see some further relief for the dollar. In the UK news that the Brexit vote in parliament is set for Jan 15 should see even further focus on that subject and sterling traders will be preparing for move volatility with that turning into a major risk event.
Looking ahead to todays trading and the main focus for the Asian session will be the aforementioned Trump speech, although Aussie traders will be monitoring the latest Building Approvals data earlier in the day. It’s once again quiet in terms of data releases in the London session but the focus will move firmly to central bank as the New York session gets going with the latest Bank Of Canada rate decision due followed later by the FOMC Meeting Minutes. Expectation is for no change on this occasion for the BOC, but we may see some volatility in the Loonie after the statement and Press Conference especially given the recent moves in the Oil market. The FOMC Meeting Minutes come later in the session but expect them to be examined with a fine tooth comb given the Fed’s latest dovish message.