The signature of the phase one deal between the US and China sent the S&P500 and the Dow to fresh intraday record highs,
although the last minute announcement that the tariff cuts on Chinese exports would not happen before the US presidential election left
investors wondering if China could ever do enough to please the Trump administration.

US equity futures extended gains in Asia, despite a mixed picture across the Asian equity indices. Nikkei was flat, Shanghai’s
Composite (-0.26%) eased, while the ASX 200 (+0.67%) advanced with technology stocks.

Gold traded a touch above the $1550 mark, as WTI consolidated near the $58 a barrel.

FTSE and DAX futures point
at a neutral start in Europe. Though an improved global sentiment will not hurt the European equities, investors in this part of the world
clearly showed far less enthusiasm on the run up to the phase one deal, therefore the US-China deal per se will unlikely see significant
reaction purchases.

Today’s light economic calendar in Europe and US will give investors time to chew and to digest the phase one deal, while keeping an eye on the
US December retail sales, which are expected to have grown by 0.3% month-on-month versus 0.2% printed a month earlier.

In Turkey, the central bank is expected to loosen its rates by an additional 50 basis points at today’s monetary policy meeting. The
CBRT already halved its one-week repo rate since July, a move that summed up to a sizeable 1200-basis-point-cut within a short five-month
period. While the lira showed a surprising resilience to systematically bigger than expected rate cuts over the past four meetings, a fifth
dovish surprise could trigger an adverse reaction given that the interest rates are now alarmingly close to the inflation levels with the
growing risk that any positive move in consumer prices would easily push the lira investors toward the undesirable negative real interest
rate territory. The USDTRY trades a touch below the 5.90 mark. A false move could send the US dollar rallying against the lira.

Finally, in Switzerland, yesterday was the fifth anniversary of the EURCHF’s 1.20 floor removal. But even half a decade after the let go of the
floor, the Swiss National Bank (SNB) remains part of the US watchlist of currency manipulators, the one from which China was let free at the
beginning of this week. The SNB’s active intervention to prevent the franc from appreciating too much added to the country’s $20 billion
worth of trade surplus with the US in 2018 displease the policy makers on the other side of the Atlantic. Americans want the SNB to keep its
hands off the market, but the truth is, without intervention, the franc’s safe haven status would strongly hit back at Switzerland with very
high prices in multiple categories from exports to tourism. Cornered by a benchmark rate of -0.75% and a clear dovish stance from the
European Central Bank, the SNB will likely continue its subtle play by maintaining its interventions at a reasonable level, knowing
however that levels above par would inevitably attract a bad attention. With this being said, an accrued mid to long term safe haven demand
for franc and the US watching, we maintain a neutral to positive view on the franc and expect that the appreciation versus the greenback
should extend toward the 0.95 mark.

By Ipek Ozkardeskaya



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