Global markets are still looking for any clear guidance as ‘contradictory ‘headlines on the status of the US-China trade talks prevent investors to engage in clear directional positions. In particular, the moves in bond markets and the major effects cross rates were again some kind of erratic in nature. Equity investors still tend to keep a rather positive bias. US indices are holding near historic top levels suggest that investors assume that current negotiations will at least lead to some kind of ceasefire, providing a more stable/predicable framework for corporations in 2020. US President Trump providing an extension for US corporations to continue doing business with Huawei apparently was seen as more relevant than yesterday’s cautious ‘comments’ from China on the chances for a deal. However, in this respect, the resilience of US equities is probably more an illustration of investor sentiment rather than a indication of market expectations on the concrete result of the trade talks. Whatever, moves in core bond yields are again extremely limited. Economic data were few (housing starts and permits OK) and with no noticeable lasting impact on trading. Fed Williams in a speech defended the ‘preemptive’ Fed  approach. The US yield curve flattens with the 2-yr yield marginally higher (+0.5 bp) almost unchanged while longer maturities decline up to 1.5 bp (30-y). German yields are rising less than one bp. 10-y Yields spread changes versus Germany are also very limited with Italy slightly underperforming (+3 bps).

On the FX markets, the euro is keeping the benefit of the doubt. EUR/USD is holding near this week’s peak level (1.1080 area) The trade-weighted dollar shows no clear trend. USD/JPY tried an intraday rebound on the improved equity sentiment, but the attempt could not be sustained. USD/JPY is holding well below the 109 mark (currently near 108.70). Over the previous days, sterling succeeded a gradual but protracted uptrend against the euro as markets saw  conservative election victory and an approval of Boris Johnson’s Brexit deal as the most likely scenario. This GBP-uptrend  took a breather today. EUR/GBP is currently trading in the 0.8560 area. CBI order data printed slightly stronger than expected, but had little impact on trading.

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News Headlines

People’s Bank of China governor Yi Gang vowed today that the central bank will step up credit support to the economy and by pushing real lending rates lower. Policymakers are keeping monetary policy accommodative to prop up slowing growth. The governor’s comments come ahead of tomorrow’s loan prime rate (LPR) decision where the central bank is widely expected to lower the policy rate.

The Hungarian central bank left its base rate unchanged at 0.90%, in line with market expectations. The MNB keeps policy easy even as Hungary’s economy is solid with core price pressures remaining strong, reflecting a tight labour market and soaring consumption. The forint gained modest ground today with EUR/HUF trading in the 334.50 area. Policy makers will review policy based on the quarterly CPI report (next in December).

IMF managing director Kristalina Georgieva signaled that there is a heavy cloud of uncertainty hanging over the global economy and urged countries to use all policy tools at their disposal to boost the economy. Countries should make use of their monetary policy space and ramp up fiscal stimulus.


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