Last weeks trade war rhetoric received quite a bit of attention from investors and traders in the European sessions, amid a lack of any major economic data releases. Risk was sold off, apparent in the reaction in equity markets, and GBP/USD looked at one point it was heading for a break below 1.32. In the latest headlines on the subject, Trump has criticised Harley-Davidson over its plans to move production out of the US as a way to avoid EU tariffs.
Before the H-D story emerged a WSJ report that Trump was considering widespread restrictions on companies that are foreign-owned, or moreover that the US could prevent companies with at least 25% Chinese ownership from purchasing businesses that had “industrially significant technology”. US trade advisor Navarro then came out and said there were no plans for such restrictions and markets breathed a sigh of relief.
Midweek, BoE Governor Mark Carney, commenting on the central bank's Financial Stability Report, didn’t really touch on monetary policy, he instead spoke about how global risks had increased and how the banks’ capital had risen in order to withstand any negative Brexit related impacts to the economy.
Risk sentiment has improved too after EU leaders reached a deal on the issue of migration and major currencies including the GBP and EUR have bounced back vs. the dollar as a result. Brexit headlines are continuing to keep a lid on cable though and it has struggled to make any form of convincing break back above 1.31. We could be in for some volatility derived from month end/quarter end/half year end currency rebalancing too.