Wall Street closed higher, pushing towards a 6-month high. Asian markets hovered at 8 month highs but traded in a mixed fashion as investors awaited developments and signs of progress in the US – China trade talks.
The markets are growing increasingly convinced that trade talks are nearing the endgame, with both the US and China move closer to signing a deal. Trade deal optimism boosted risk appetite across the start of the week. However, as we often see after a trade talk rally, investors find it difficult to maintain given the lack of solid evidence. Reports are pointing to a June meeting between President Trump and China’s Jinping Xi. However, this wouldn’t be the first time that a month has been set, only to be kicked down the road.
After a stellar first quarter, investors are searching for reasons to maintain these current levels in the markets. An easing of global slowdown fears, signs of trade war progress and signs of a softer Brexit are key points that investors will be watching out for. With trade talks continuing we could get further trade headlines that support risk appetite but a firm date for signing any agreement remains firmly on a wish list.
Weaker than forecast US ADP private payroll figures and softer ISM non-manufacturing data kept any moves higher in check. Attention will now turn to US jobless claims for further clues on the health of the US labour market ahead of the NFP report on Friday.
The pound was climbing higher versus the dollar in early trade on Thursday, extending gains from the previous session. Brexit developments were coming through thick and fast as the UK moves closer to the April 12th deadline.
Theresa May and Jeremy Corbyn kicked off cross party talks in a bid to break the Brexit deadlock in Westminster. Meanwhile Parliament took further steps to prevent a chaotic no deal Brexit by law. Should talks between Theresa May and Jeremy Corbyn fail, Theresa May will be forced to request an extension rather than leave the EU with no deal. As the prospect of a hard, no deal Brexit fades, the value of the pound increased.
ECB minutes to weigh on the euro?
As the euro struggles to gain traction in 2019, investors are unlikely to find reason to cheer from the ECB minutes. A the ECB meeting on 7th March, the central bank announced a new round of LTRO loans. It also lowered its forward guidance and pushed back the expected timing of a rate hike. The euro dived to a 20-month low. Investors will scrutinize the minutes for signs that ECB policy makers are considering further action to counter the slowdown in the eurozone. Dovish minutes could send the EUR/USD below 2019’s low of $1.1175.