US, China Trade Talks and World Bank Outlook May Rattle Markets

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TALKING POINTS – US, CHINA, TRADE WAR, WORLD BANK

  • Fruitless US-China trade talks, World Bank forecast threaten markets
  • Japanese Yen may fall if upbeat cues in S&P 500 futures are sustained
  • US Dollar corrects higher, Canadian Dollar up on firmer BOC outlook

A dull offering of economic data might keep sentiment trends at the forefront. Bellwether S&P 500 futures are pointing higher, hinting at a risk-on lean. A weaker Japanese Yen may be the most obvious G10 FX response in such a scenario. Follow-through might be lacking however, if optimism about US-China trade talks proves to be misplaced while worries about global growth resurface.

The World Bank is due to publish an updated set of economic forecasts. The latest projections already put 2019 worldwide GDP growth at 3 percent, the weakest since 2009 when it contracted amid the Great Recession. A further downgrade may rattle already jittery investors. An ongoing US government shutdown and troubling cues in key data after yesterday’s soft service-sector ISM data might amplify concerns.

US DOLLAR REBOUNDS, CANADIAN DOLLAR UP ON BOC OUTLOOK

The US Dollar traded higher against nearly all its major counterparts in Asia Pacific trade. The move seemed to be corrective after the benchmark unit fell to a one-month low yesterday. Traders may have been inspired to pare back anti-USD exposure accumulated over three days of losses since last Thursday ahead of Wednesday’s FOMC minutes publication and Thursday’s speech from Fed Chair Jerome Powell.

The Canadian Dollar was the only currency that managed to hold its ground against the resurgent Greenback. It seemed to be building on earlier gains scored courtesy of upbeat Ivey PMI data. It showed the pace of economic activity growth accelerated in December, sending local bond yields and the currency higher in tandem in a move that might speak to a hawkish shift in BOC policy bets.

See our market forecasts to learn what will drive currencies, commodities and stocks in Q1!

ASIA PACIFIC TRADING SESSION

US, China Trade Talks and World Bank Outlook May Rattle Markets

EUROPEAN TRADING SESSION

US, China Trade Talks and World Bank Outlook May Rattle Markets

** All times listed in GMT. See the full economic calendar here.

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