The fact of signing a new trade agreement for its "first phase" in Washington did not affect the dynamics of world markets. The expectations and even some disappointments associated with it, on the contrary, put pressure on the mood of investors before its signing.
First of all, of course, this was due to the fact that the agreement itself was expected, and its content did not carry any surprises. China pledged to acquire US $ 200 billion worth of products from the United States over the next two years. This was expected, and therefore, no reaction to this news was followed. The contract also confirmed fears, which became the main reason for the fall in risk appetite in the markets on Tuesday - the preservation of new increased tariffs on Chinese imports in the amount of $ 370 billion. Moreover, the American side, represented by its representative G. Gilligan, said that "the second phase of the agreements can be reached if the content of the" first phase "is fulfilled by the Chinese side."
In general, the outcome of the negotiations did not only completely defuse the trade contradictions between the countries, but also, seems to laid some unpleasant prospects for further contradictions. That is why on the eve of the US stock market was under pressure, and after signing the contract was moderately optimistic. In general, the currency market reacted to this news quite restrained. Major currencies were traded without any specific focus. The yen did not actually change against the dollar, although the franc appreciably added, obviously reflecting its growth in someone's desire to insure their risks.
In addition, these concerns were fully reflected in the dynamics of US Treasury bonds. The benchmark yield of 10-year-old traders has fallen, and the increase is somehow sluggish, although it is trying to recover in electronic trading during the morning today.
Summarizing above, it can be noted that investors reacted to the fact of signing the contract for the "first phase" with restraint, since it had already been taken into account in the dynamics of prices in the markets. At the same time, no surprise happened. The disappointment preceding the signing additionally offset the positive effect.
Assessing the current situation, we believe that the attention of the market will now switch again to the problem in the Middle East which is between the USA and Iran, the dynamics of the election campaign in the States and, of course, to the incoming economic data that will set the tone in the markets.
Today, the market's attention will be focused on the publication of retail sales data, the index of production activity from the Federal Reserve Bank of Philadelphia and the minutes of the ECB's December meeting on monetary policy.
Forecast of the day:
EUR/USD remains in a short-term upward trend. It is trading above 1.1145. The pair is likely to continue to grow by 1.1240, if the promulgated ECB protocol shows the persistence of contradictions regarding the prospects for soft monetary policy.
The USD/CHF pair is under pressure in the wake of continuing concerns about further global economic growth. It will continue to decline to 0.9575, if it does not grow above the level of 0.9650 and, conversely, drops below the level of 0.9630.
