The key time has come for a trade agreement between the United States and China, because the phase one of the agreement is to be signed this week, which may be a key event for the markets, especially since investors have already been optimistic about the agreement, raising indices on Wall Street.
In the third week of January, the Chinese delegation is to go to Washington for a three-day visit, so that finally on January 15, Wednesday, the phase one of the trade agreement can be signed and, as a result, the tension between the United States and China in international trade is eased. At the moment, we do not know the specific details of the agreement, but information from several sources indicates that China will agree to increase purchases of American agricultural products (e.g. China is the main recipient of American soybeans), as well as to resolve some disputes regarding intellectual property protection, which was one of the main reasons President Trump began the trade war. In return, the Americans will suspend the introduction of new tariffs on Chinese products and reduce existing ones. After signing the phase one of the agreement, President Trump will later visit Beijing to negotiate the phase two of the agreement.
It is worth recalling that the stock market may have already discounted the agreement, and therefore the signing of the phase one may even lead to the buy the rumors, sell the fact phenomenon. The main instruments that are worth paying attention to are the US30, US100 and US500 on the Conotoxia trading platform.
From the typical macroeconomic data for the United States it is worth highlighting inflation data, which will be published on Tuesday, January 14 at 14:30. Market consensus points to a possible 2.3 percent rise in prices in December both for consumer CPI inflation and core inflation. If such data are confirmed, then US inflation will be the highest since September 2018. However, this should not affect the Fed's decisions on interest rates for the moment. The market even expects that by the end of this year US interest rates may be cut.
Interestingly, the week also starts for Great Britain and the British Pound, which loses the most among the world major currencies, after comments from one of the Bank of England representatives. BoE's Gertjan Vlieghe said he would vote for interest rate cuts this month if there are no signs of a recovery after recent parliamentary elections. From the macroeconomic data, it is worth paying attention to the reading of publications on GDP and manufacturing production in November (January 13 at 10:30). In turn, on Wednesday at 10:30 inflation will be published for December, and on Friday at 10:30 retail sales data will appear.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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