Global trade talks dominated proceedings in this holiday shortened trading week, along with central bank rhetoric and Brexit posturing.

There have been a number of reports that senior Sino-U.S negotiators are working on multiple “memorandums of understanding” that would form the basis of a final trade deal. Markets are expecting some announcement on Friday Feb 22.

With one trade war potentially winding down, another may be beginning – China and Australia. There are reports that China’s Dalian port authorities have banned imports of Australian coal. Apparently, they imposed the indefinite ban covering five harbors at the start of February. Coal was Australia’s second-biggest export in the year through June 2018, making up +15% of exports.

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Central bank views

Reserve Bank of Australia minutes (RBA) Feb minutes were in line with most recent quarterly statement on monetary policy. The board saw “significant uncertainties” on the economic outlook and forecast.

Riksbank the weaker-than-expected outturn for Swedish inflation in January this week suggests that the Riksbank will be in no rush to raise interest rates again. With core inflation remaining subdued, and increasing downside risks to economic growth, the chance of an interest rate hike in 2019 has fallen.

Federal Open Market Committee minutes (FOMC) January Federal Reserve minutes revealed the extent of the shift from “hawkish” to a more “dovish” tone. Fed officials expressed concern about risks to economic growth, according to the minutes, prompting a halt to rake hikes and commitment to data dependency.

European Central Bank minutes (ECB) More data is needed to assess medium term impact of economic slowdown; growth in region could be below potential for several-quarters. Officials discussed new long-term loans for Banks at the January meeting and will review economic outlook at the March policy meeting. And not a surprise, officials flagged “acute risks” over Brexit

Brexit

The next key date is February 27, when parliament will vote on the government’s withdrawal plan, or alternatives if PM May has failed to win any concessions. It is also possible, although not certain, that parliament could vote to rule out a no-deal Brexit scenario.

Sterling remains susceptible to Brexit rhetoric. The pound has drifted off its month highs after EU’s Juncker stated that “Brexit was a disaster” and that he was suffering from Brexit fatigue and he could not exclude the possibility of a no deal with terrible consequences. Earlier Thursday, Chancellor of the Exchequer Hammond had noted that he saw some movement from EU side on backstop issue.

On the Economic Calendar, Kiwi retail sales will be released on the open Sunday Feb 24 (04:45 pm ET).

Market concerns:

  • U.K/Brexit fallout – PM May’s Brexit vote Feb 27
  • Sino/U.S – trade & tariffs
  • China/Aussie – coal war begins
  • Weaker China data
  • Muller/Trump – AG Barr is set to announce the completion of the report
  • OPEC, Saudis, Venezuela & Trump
  • Geo-political concerns in Russia, Ukraine and France
  • ‘Twitter Trump’
  • U.S debt ceiling worries
  • Spanish snap elections expected to be full of surprises April 28

Next week: NZD retail sales (Feb 24), U.K inflation hearings & U.S consumer confidence (Feb 25), CAD CPI, U.K Parliamentary Brexit vote, ANZ business confidence & AUD private capital expenditure (Feb 27), U.S advanced GDP (Feb 28), CAD GDP & U.S ISM manufacturing PMI (Mar 1).

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