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TALKING POINTS – YEN, US-CHINA TRADE TALKS, POUND, BREXIT, TRUMP

  • Yen down, commodity currencies rise on US-China trade deal optimism
  • Pound outperforms vs G10 FX peers amid hopes for Brexit breakthrough
  • European, US stock index futures suggest risk-on bias may be sustained

A rosy mood across Asia Pacific financial markets at the start of the trading week lifted the sentiment-linked Australian, Canadian and New Zealand Dollars alongside regional bourses. The anti-risk Japanese Yen succumbed to selling pressure in the meanwhile, losing ground against all its G10 FX peers.

Hopes for an imminent advance in US-China trade talks appeared to be the main catalyst. Various reports making the rounds across the wires suggested Washington could lift most or even all recently imposed tariffs if Beijing delivers on pledges to defend intellectual property rights and buy more US products.

US President Donald Trump may have been marginally helpful too. He used a speech at the Conservative Political Action Conference (CPAC) to talk down the US Dollar, saying it is “too strong”. Markets may have read this as indirect pressure against further Fed interest rate hikes.

BRITISH POUND UP ON BREXIT DEAL OPTIMISM

Signs of a Brexit breakthrough probably didn’t hurt either. Indeed, the British Pound outperformed amid reports that pro-Brexit members of the Conservative Party have outlined the conditions for supporting the EU withdrawal deal proposed by Prime Minister Theresa May.

Senior Tory MP Graham Brady said a deal on the thorny issue of the “Irish backstop” – the major sticking point so far – is in sight. This is a provision that would prevent the establishment of a hard border between Northern Ireland (a part of the UK) and the Republic of Ireland (an EU member state).

STOCK INDEX FUTURES HINT AT RISK-ON MOOD AHEAD

Looking ahead, a relatively muted offering on the economic data docket may keep sentiment trends in the spotlight. Bellwether European and US stock index futures are pointing convincingly higher, suggesting that the risk-on dynamics witnessed in APAC hours have scope for follow-through in the near term.

What are we trading? See the DailyFX team’s top trade ideas for 2019 and find out!

ASIA PACIFIC TRADING SESSION

Asia Pacific Trade Economic Calendar

EUROPEAN TRADING SESSION

Europe Trade Economic Calendar

** All times listed in GMT. See the full economic calendar here.

FX TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter