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Trump to meet Xi at G20

By Jake Trask

Sterling remains depressed as we end the week as markets continue to price in Prime Minister, Theresa May’s Brexit deal getting defeated at the parliamentary vote due to take place on 11th December. There is still a lot of time for opinions to change however it looks likely this situation will roll into the new year adding further downward pressure over the Christmas period. After a quick tour of the UK, May has headed to the G20 meeting in Buenos Aires hoping to garner support for reform of the World Trade Organisation as head for the EUs door. On the data front it’s been a quiet 24 hours with little of note today either however data remains a sideshow as politics holds the pound prisoner. GBP/USD has traded between 1.2755 and 1.28 over the past 24 hours, it’s currently at 1.2790.

The dollar has clawed back some of the losses incurred since Federal Reserve Chairman, Jerome Powell’s dovish speech midweek. Powell dialed back expectations of the number of rate hikes in 2019 as he stated that the Federal funds rate was close to a neutral level, countering comments he had made in October when he stated it was some way off. Last night saw the release of the minutes from the last FOMC meeting which temporarily weakened the dollar. Some members of the committee see a slowdown in global growth outside the US as potentially causing a headwind to Americas output throughout 2019 reinforcing the view that we will only see one or two rate hikes in 2019 when three was the consensus previously. The main talking point for markets today and over the weekend will be developments with regards to trade between the US and China. US President Donald Trump and China President, Xi Jinping are due to meet face to face at the G20 meeting in Argentina today/tomorrow and markets will be hoping for some cooling of tensions between the two superpowers. Positive dialogue could boost risk assets come Monday morning however given Trumps unpredictability this is far from assured. USD/JPY trades at 113.45 with EUR/USD at 1.1380.

Aside from the ongoing Italian budget impasse it’s been a relatively quiet week from the Eurozone with little coming from a speech earlier in the week from European Central Bank chief, Mario Draghi and little top-tier data to digest. Thankfully there is something of note happening later this morning with the latest inflation numbers from the EZ due. The overall reading trades just above target at 2.1% however core inflation is nearly half this at 1.1%. Given the recent slowdown in economic output from the EZ combined with oil falling nearly a third in value over the past two months it seems unlikely we will be getting to the just under 2% target anytime soon without a calming of trade tensions and resolution re: the Italian budget to boost market sentiment. GBP/EUR trades at 1.1245.

AUD/USD has manage to keep its head above the .73 handle this week aided by a global dollar sell-off on Wednesday night. There has been little data of note since Wednesday nights poor Private Capital Expenditure number so eyes will now turn to Argentina to see if the Aussie can get a boost from a calming of trade tensions between the US and China. GBP/AUD trades at 1.7505.

USD/CAD has made a play to break back through 1.33 over the past 24 hours however has failed to get a hold above the big number. Holders of the loonie, like the other commodity currencies will be hoping for good news from Argentina re: trade in an effort to boost the local buck. Before those headlines hit the wires we may see some support if growth data beats forecast at lunchtime today. GDP is expected to rise 0.1% for the August-September period. GBP/CAD trades at 1.7025.

NZD/USD has traded between .6840 and .6880 over the past 24 hours as traders await the outcome of the G20 summit. Reserve Bank of New Zealand Governor, Adrian Orr spoke in Auckland overnight however there was little mention of monetary policy to move kiwi-crosses. GBP/NZD sits at 1.8650.