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US-China Sign Phase One Trade Deal

Published January 16, 2020

The major news overnight is that the US and China have finally signed the much awaited “phase-one” trade deal.  Market sentiment has remained positive with equity markets reaching new highs, while currency markets have been fairly contained with the deal signing largely priced in already.  The AUD has clung onto 0.6900 with the cross rates remaining barely unchanged.

Trade Deal Signed

The US and China have announced an initial trade deal that will roll back some tariffs and boost Chinese purchases of U.S goods and services.  However, the deal will leave in place 25% tariffs on $250 billion worth of Chinese industrial goods and components used by U.S manufacturers.  Currency reaction to the announcement has been limited with the US dollar moving slightly lower.

UK Inflation Weaker Than Expected

UK inflation numbers fell to 1.3% annualized in December, its weakest since November 2016. With a few BOE members already talking of lower rates and economic data dwindling, markets are now treating a BOE rate cut as a matter of when not if.