Overview
US President Donald Trump on Friday announced that he and a Chinese delegation reached the first phase of a what he called a “preliminary” deal to end their trade war.
President also suspended his long-threatened tariff hikes on at least $250 billion in Chinese imports to 30% from 25%, starting from October 15. However, existing tariffs remain in force as both sides work to do more over the coming three to five weeks. Trump called the phase one deal “very substantial” although they failed to address the thornier issues such as technology transfers and currency rates. The deal is perceived by markets to be another truce.
“We’ve come to a very substantial phase one deal,” US President Donald Trump announced after he met with Chinese Vice Premier Liu He on Friday. “We’ve come to a deal, pretty much, subject to getting it written.” He added that a final agreement on paper would take about three to five weeks.
Trump also said he would meet Chinese President Xi Jinping at the APEC summit in Chile next month.
Bank of Japan Governor Haruhiko Kuroda said that the BoJ still had the tools to achieve its 2% inflation target. Kuroda rejected criticism that the central bank has run out of options to ramp up stimulus.
“The BOJ still has sufficient room to (ease) monetary policy. But even if we were to act, we will choose the most appropriate policy by weighing the benefits and costs of each step,” he said.
US consumer price index CPI increased by 0.1% in August. During the past year through September, the prices rose to 1.7%, the same margin in August.
While the new net asset purchases program by the ECB have not been found to be satisfactory, US-China negotiations and Fed interest rate cut expectations increase the volatility in the exchange rate. In the pair, which is technically in an upward trend after the break in the medium term descending channel, we will be following the 1.1085 and 1.1100 levels if the current upward movement is maintained. If the rise exceeds this region, 1.1145 level might be tested. While the 1.0970 level remains a supportive factor in the possible withdrawals, the 1.0940 and 1.0900 levels will continue to be monitored for an acceleration in potential sells.
Positive talks last week between the British and Irish prime ministers on the backstop have increased the likelihood of a deal in Brexit. In line with the news, the rise in the pound accelerated, while 1.2650 and 1.2740 levels will be followed in terms of resistance. If the rise exceeds these regions, the 1.2800 level may be watched. While the 1.2500 and 1.2400 levels will be supportive in possible withdrawals, we will follow the 1.2360 level if the withdrawal reaches this region.
The risk appetite increased after the limited deal reached in the US-China trade negotiations, while a depreciation in safe havens deepened. The uptrend in the exchange rate reached 108.50, the upper band, but retreated after facing difficulty above. In order to maintain the current short-term sales pressure, the levels of 107.60 and 107.00 will remain supportive. If the downward movement reaches below the latter region, we will be watching the 106.50 level. In the case of upward movements, 108.50 will continue to be monitored for resistance.
While speculations on the Fed’s next interest rate decision continues, inflation data from Canada is on the calendar during the week. While the decline in the exchange rate finds support at the 1.3200 region, pricing below the session average may indicate a continuation of the downward trend in the medium term. The 1.3250 level maintains its importance in terms of resistance. We will be following the 1.3300 and 1.3355 levels if the rise exceeds this region. In the case of possible withdrawals, the 1.3200 and 1.3170 levels will be followed in support. If the withdrawal reaches below this zone, we will be watching the 1.3100 level.
