Wednesday January 15th, 2020

Currency markets stalled within tight ranges as they await the signing of the Phase One trade agreement. China is committed to buy at least $200 bin in US exports over two years including Manufactured goods ($80bln), Energy ($53bln), Agriculture ($32bln) and Services ($35bln). Signing of the agreement is scheduled to take place in the White house at 11.30 EST. Also this morning US PPI data will be released which will be watched closely by the markets. Trade exposed currencies have been relatively stagnant this week, remaining cautious as the US intends keeping some tariffs in place until the US elections.

Crude prices slipped with the US intending to keep some tariffs on Chinese goods in place pending a phase two agreement. The C$ continues to linger within its current tight trading range as it awaits the Phase one signing. Investors will listen to Chinese comments at the signing for any indications of caution or concern. 1.3115 remains a key resistance point for C$. Our bias for 2020 is stronger C$, but C$ is vulnerable to short-term volatility.

Euro firmed this morning amid a cautious Sino/US trade mood as investors assess the effectiveness of the phase one agreement. The EU chief negotiator is conducting talks with the US over auto tariffs and tech taxes in Washington. The primary concern is the US may switch their focus to Europe and impose further tariffs on the EU. Markets will watch for US PPI data and for any related trade comments for direction.

GBP remains under-pressure with expectations growing that the BOE will likely cut interest rates. BOE member Michael Sauders commented that “prompt” and “aggressive” response might be needed. GBP will remain under pressure while uncertainty remains over the outcome on EU trade post Brexit. Just 16 days until UK official exit from the EU.