Key Points From This Week

US-Sino Trade Deal Signed

The Phase one trade deal (which was originally announced in October 2019) was finally signed this week. US & Chinese leaders signed the deal in Washington on Wednesday, which broadly encompasses China committing to $200 billion of US purchases over the next two years in exchange for the US reducing tariffs. Talks will now move onto the second phase of the deal aimed at delivering a phase-two agreement.

US & UK Inflation Weaken

Final 2019 inflation readings were released this week with CPI undershooting expectations in both the US and the UK in December. In the US, final 2019 inflation was confirmed at 2.3%, however, which was the biggest annual rise since 2012, though weakness over recent readings has taken the shine off it. In the UK, annualised December inflation was 1.3% vs 1.5%, further boosting expectations of forthcoming BOE easing.

Trump Impeachment Begins

The impeachment trial of President Trump began in the US Senate on Thursday. Only the third time that such a trial has been conducted. The opening ceremony was held, which included the reading aloud of the articles of impeachment against the president, along with the swearing in of the Supreme Chief Justice and other Senators who will conduct the trial. Given that the Senate is controlled by trump’s own Republican party, the chances of him being removed from office look slim.

ECB Minutes Show Better Unity

The December ECB meeting minutes reflected a much more unified front from the bank’s policymakers under Lagarde. The minutes showed that the group was broadly in agreement that the current monetary policy stance was appropriate with the bank confident that there have been signs of stabilisation recently, pointing towards a recovery due “later on” this year.

Key Events Next Week

BOJ Rates Meeting

While most of the G10 has been on an easing path over recent months, the BOJ has held off from any further adjustments. There are now subtle upside risks going into the first meeting of the year. With the Japanese economy having avoided any of the harsher effects of the global downturn, the BOJ will likely keep rates on hold though we could see upward revisions to growth forecasts given the signing of the US-Sino trade deal and the boost from the government’s fiscal package.

BOC Rates Meeting

Up until recently, many players were expecting the BOC to cut rates early in 2020. However, in light of the recent uptick in inflation and with the US-Sino trade deal in place, a rate cut now looks less likely. The BOC should remain on hold this month noting residual, though somewhat diminished risks.

ECB Rates Meeting

Following the release of the December minutes, the January meeting is likely to retain a similar tone with the ECB noting that the current monetary policy stance is appropriate. In terms of the outlook, again the bank is likely to highlight signs of stability alongside keeping an eye on incoming data.

Keep An Eye On

Trump Impeachment Proceedings

The actual arguments will begin on Tuesday. While conviction of Trump is not expected given the Senate is controlled by the Republican party, keep an eye for any particularly damaging moments and especially the media/market reaction. The trial is expected to play a pivotal role in the chances of a Trump re-election this year.

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