In a week that is meant to see the signing of the US-China trade deal, the markets were sleepy at Monday’s open. The pound, meanwhile, took a tumble.
According to a tweet from Donald Trump on December 31st, the ‘phase one’ trade deal should be signed on January 15th. Then, on January 10th, he muddied the waters somewhat, stating that the agreement could be signed ‘shortly thereafter’. The 86-page document is also yet to be released, with both sides reportedly still in the process of reviewing its text.
If this lack of clarity persists as Thursday approaches, investors might start to get a bit antsy about any hold up or conflict, potentially threatening to drag the Dow Jones further away from its recent all-time high of 29000.
At present, however, the Western indices seem pretty content. The FTSE rose 0.2%, keeping above 7600, with the DAX and CAC up 0.1% respectively, leaving them at 13500 and 6040. As for the Dow, a forecast 0.3% increase should put it back past 28900.
Given the state of sterling, it is a surprise that the FTSE isn’t even higher. The pound plunged half a percent against both the dollar and the euro, sinking to a 2-week-plus low of $1.30 against the former and €1.1687 against the latter. Siphoning the life from the currency is the unstoppable march towards the Brexit deadline on January 31st, and the awareness of the difficult trade negotiations that sit the other side. This on top of the lingering impact of Mark Carney’s rate cut hints from last week.
The pound’s day could be helped, or more likely further hindered, by the morning’s UK data dump. The monthly GDP reading is set to remain unchanged at an ominous 0.0%, with manufacturing and industrial production set to fall to -0.3% and -0.1% respectively.
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