The US – China trade deal is like watching a live show in the theatre of the absurd. The Trump administration revealed a detail
that nobody expected just before the signature of the phase-one trade deal today: the tariff cuts will not take effect before the US election
in November. This means that the US tariffs will continue weighing on Chinese exports for almost an additional year, while the emerging
market giant will certainly be asked to deliver on its promise to buy massive amounts of US farm goods and manufactured products
immediately. The risk here is that the double-standard agreement could provide a weak basis for the future negotiations, impair the
benefits, or even spoil the deal.

US equity futures and treasury yields slipped, gold and the Japanese yen gained as latest news raised a few eyebrows. The Swiss franc
remained muted.

FTSE (-0.18%) and DAX (-0.30%) futures are set for a negative start to the session following a mixed sentiment on Tuesday.

WTI crude
consolidated near the $58 a barrel as tensions between US and Iran left its place to renewed trade concerns with China.

The only highlight of the day was JP Morgan posting a solid 21% profit in the fourth quarter thanks to an impressive fixed income trading
revenue. JP Morgan advanced to 140 a share in New York. Financials in Wall Street gave a boost to the Dow Jones index. Bank of America and
Goldman Sachs will post their Q4 earnings today.

In the FX, the euro rebounded from 1.1104 against the US dollar ahead of the German annual GDP release, expected to have retreated from
1.5% to 0.6% in 2019. The European industrial production, on the other hand, may have improved to 0.3% month-on-month in November versus
-0.5% posted a month earlier.

Cable advanced above the 1.30 mark. It seems that this level is a magnet for the buy-side despite soft economic data and a significant
dovish shift in the Bank of England’s (BoE) policy stance. Due today, the inflation data will likely confirm that British consumer prices
have stagnated near a three-year low of 1.5% in December. Soft data could give a stronger case for a BoE rate cut in the coming months.
Therefore, the pound’s advance against the US dollar could remain limited following a soft inflation figure.

Speaking of inflation, the headline inflation in the US advanced from 2.1% to 2.3% year-on-year in December, versus 2.4% expected by
analysts. Higher gasoline and energy prices were the root cause of faster price inflation last month, while the core inflation, excluding
food and energy prices remained under control at 2.3%, not low enough to give the Fed a blank check to pull its rates lower, yet not alarmingly
high to call for a tighter monetary policy either.

By Ipek Ozkardeskaya

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