Good news regarding global trade continue flowing in as if to cover up Trump’s impeachment story and keep the market’s attention elsewhere. This time, Trump and French President Macron shook hands to pause their digital tax dispute and prevent an escalation of tariffs this year.

But Asian equities sold off heavily in the overnight trading session. The sudden reversal in Asian risk appetite was triggered by a lower IMF outlook for global economic growth, the downgrade of Hong Kong’s credit rating at Moody’s and a fourth death in China, which grew concerns that the highly contagious respiratory disease that has been spreading through China may become a higher-scale problem as hundreds of millions of Chinese tourists are preparing to travel across Asia and beyond for the upcoming Chinese New Year.

FTSE (-0.44%) and DAX (-0.28%) futures fell, as US equity futures retreated from their record highs hinting that a decent wave of sales is about to hit the global equity markets.

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Gold extended its advance to $1568 per oz, the yen and US treasuries gained.

The USDJPY stepped below the 110 mark on increased safe—haven demand for yen and a less dovish Bank of Japan (BoJ) statement. The BoJ maintained its policy unchanged at today’s meeting but raised its growth forecasts implying that further monetary stimulus is probably off the table for now.

Oil retreated. WTI crude consolidated near the $58 a barrel hinting that anxieties regarding the Libyan disruptions would be quickly forgotten faced with more serious demand-side concerns, given that the real struggle in this market is a drying demand versus plenty of oil.

The euro was offered near the 1.11 mark against the US dollar, but that could change with the release of good economic data in Germany later this morning. Expectations hint that the German ZEW economic sentiment index may show an uptick in January amid US-China trade truce and slightly improved economic data. If this is the case, the mood across the euro markets could improve walking into Thursday’s European Central Bank (ECB) meeting.

Cable on the other hand consolidated near 1.30 ahead of the UK jobs data. The unemployment in Britain has certainly remained unchanged at 3.8% over three months to November, but average earnings may have grown at a slower pace. Unless a big surprise on the data front, the pound will likely be bumping into a thick layer of offers past the 1.30 mark as dovish Bank of England (BoE) expectations spread with surer steps. According to the activity on SONIA MPC futures, the probability of a 25-basis-point cut in January meeting advanced to 72% versus none at the beginning of this year. This big move around in BoE expectations, combined with the unwinding of the post-election longs, could throw the pound in bears’ arms. From a technical perspective, a move below 1.2920, the major 38.2% Fibonacci retracement on September – December bounce, should indicate a medium-term trend reversal in pound-US dollar.


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