A touch of trade uncertainty

Posted by: Paul Donovan

20 Nov 2019
  • The US Senate unanimously passed a bill that would require the US State Department to assess Hong Kong's autonomy each year. The Chinese government threatened retaliation if this becomes law (without saying what the retaliation would be). Investors worry that this might prevent a China-US trade deal. However, risk market declines have been fairly limited, suggesting that investors' base case is that a deal will still take place.
  • US Federal Reserve policy meeting minutes are due. These matter as there is a sense of a shift in the Fed's positioning. Rate cuts this year were an insurance policy, rather than being required by economic data. The Fed is now signaling a pause. New York Fed President Williams (an economist, not a lawyer) warned against focusing on individual data points for guidance. Sensible advice, given data quality problems.
  • The UK election saw Prime Minister Johnson and leader of the opposition Corby trade election slogans last night. Polls suggest the event was a tie. Common sense suggests no one outside the political bubble cares, or even watched. Foreign exchange traders seem almost as uninterested as real people are.
  • German producer prices are due (a proxy for corporate pricing power). Otherwise the data calendar is quiet.

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