Markets this morning have opened a little reserved, after mix signals coming from the progression being made between the US and China. Remarks from President Xi saw markets react positively as he promised to open China’s door even wider by providing higher market access, while also lowering import tariffs. Pressure had been mounting on Xi to respond to President Trump’s announcement on Friday of an additional $100bln in tariffs on Chinese imports. Markets in the US took the news as a positive, with the dollar losing some of its support as investors sold the currency with equities being one of the main beneficiaries. The S&P 500 was up 1.7 percent, while the Dow Jones index soared by 1.8 per cent. However gains here were limited, mainly because what President Xi said wasn’t all that different to previous pledges, and offering no new compromises to Trump.
The EUR/USD gained 0.29 percent in yesterday’s trading session. The single currency traded as high as 1.2386 after comments from European Central Bank Governing Ewald Nowotny, that the ECB’s EUR 2.55trn QE program would be wound down by the end of this year, paving the way for the first rate rises. An ECB spokesperson however was quick to follow up on Governor Nowotny’s views, stating his statement did not represent their views. The market will have to wait patiently till June or July this year to get a real understanding of the ECB’s forward guidelines.
In the UK, where we had some early data out this morning which came in mixed. While the trade deficit narrowed more than expected to -10.2B, Manufacturing Production contracted 0.2 percent in February and Industrial Production expanded 0.1% during the same period, both prints coming in below initial estimates. The pound has reacted negatively to the releases, currently down against its major peers with GBPUSD trading back below 1.42, while GBPEUR retracted back from highs close to 1.15.