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The markets have snapped back with a risk-on attitude following the weekend’s headlines and various soundbites of trade talks between China and the US where both nations have agreed on a trade war truce, for the time being at least;

This has given the dollar a bout of fresh demand as traders expect the US protectionist stance and soft dollar policy to take a pause and a perhaps a rethink to come within the Trump administration.  Across the pond, Italian politics continues to weigh on the euro. Fitch warns that a new government would increase fiscal risks. The M5S-League accord, after months of political deadlock and the subsequent prospects of returning to the polls, has provided some relief. However, their costly and eurosceptic government programme has also kicked investor confidence.

Key fundamental headlines, (source LiveSquawk):

  • Italy’s Salvini: aim is to make Italy grow to reduce debt.
  • Italian bond sell-off continues as populists set to rule.
  • Fed’s Harker: sees 2 more rate hikes in 2018, could support an additional hike.
  • Fed’s Bostic: sees US economy on track, close to fed’s twin goals.
  • Fed’s Kashkari: fed should not move too quickly to raise rates.
  • US Sec. Of State Pompeo lays out steep terms for Iran nuclear treaty.
  • US Tsy Sec. Mnuchin: ‘very meaningful progress’ with China on trade issues.
  • ECB’s Nowotny: nervousness about Italian policy under future govt, must wait.
  • Dollar index hits 6-mth high as the market sees signs of ebbing global trade conflicts.

Key notes:

  • China’s Foreign Ministry: Don’t want trade tensions with the US
  • US Tsy Sec. Mnuchin: meaningful progress was made in the latest China trade talks
  • Italian politics chaos benefitting USD? – Rabobank
  • Emerging Markets: A sudden chill – BNPP
  • Markets: What is most important in this week ahead? – Nordea Markets