Collinsonfx Daily Market Commentary

Equity markets rebounded overnight, in both Europe and the USA, fuelled by growing confidence in the US/China trade war. Rumours swirled around markets that the Chinese were keen to do an interim or partial trade deal. This may appeal to the US, who have insisted up until now on a comprehensive deal, but political circumstances may suggest an interim compromise. President Trump has had his negotiating position undermined by his domestic political enemies and he may wish to agree to an interim deal with China, in order to concentrate on the Democrats and fighting the coming Presidential election. The Fed released the minutes from their last meeting, which warned of threats to the US economy from the ongoing trade wars, but felt market expectations for further monetary assistance was too high. The Fed's dovish attitude did little to impact interest rates or currencies.

The EUR traded 1.0970, while the GBP held above 1.2200, more focused on the fast approaching Brexit deadline. The train is fast approaching the crash site, with no deal in sight. The positive speculation over the US/China trade negotiations supported the trade exposed commodity currencies, but it is hard to see any substantial upside, until the two sides sit down tonight. The AUD traded 0.6725, while the NZD attempts to regain 0.6300, with some stronger domestic economic data expected to provide some upside.

The US/China trade talks resume tonight and that will be where markets are focused.