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Risk sentiment is the rise as trade talks between the US and China might be brewing, according to analysts at Danske Bank.  

Key Quotes

“US Treasury Secretary Steven Mnuchin is reportedly looking to meet China’s key economic official, Liu He, to resume talks. This comes as the trade dispute is set to intensify this week with the Trump administration imposing tariffs on another USD200bn of imports from China.”

US Treasury yields fell yesterday  as the US PPI figures came out on the weak side of expectations ahead of today’s CPI release, and the US 10Y faded its rise to now trade around 2.97%.”

“USD also softened a bit on the news of US-China talks and EUR/USD is back above 1.16. Meanwhile crude oil prices continued to edge higher, with Brent briefly above USD80/bbl yesterday, led by a combination of worries over hurricane Florence amid US sanctions against Iran and low US inventories.”

Furthermore, an ECB sources story yesterday hinted that Draghi and co today will present slightly lower GDP forecasts  and stress downside risks to growth due to the weaker external demand (likely trade war driven) whereas the ECB is likely to keep its inflation outlook unchanged. The market reaction was limited and we expect today’s meeting to be one for the ‘feinschmeckers’ as no major announcements should be due.”

 

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