U.S.-China trade talks resume in Washington today with the aim of striking a comprehensive deal ahead of the March 1st deadline. A sharp slowdown in auto sales sparked fresh worries about the Chinese economy Monday but the holiday-thinned market shrugged. Gold and silver are the only gainers versus the U.S. dollar while all major currencies are down against the greenback. Another round of U.K. economic data is due as parliament continues to fray. The video below discusses the updated EUR/USD charts and analysis, GBP/USD, DAX, SPX, VIX and USD/CHF.
Metals are supported by the premise that as long as global economic data shows no support for fresh policy tightening as inflation remains neutral. Energy prices are also pushing higher, while the Premium OIL long deepens in the green.
U.K. Jobs growth for December pushed higher, adding 167K for the quarter, while pay growth rose 3.4% for the year further exceeding the level of inflation at 2.1%.
Chinese auto sales fell a staggering 15.8% in January in the seventh consecutive decline. The drop underscores the challenges that policymakers face in re-stocking demand. Much of the risk trade rebound in the past six weeks has been based on the belief that Beijing can re-ignite growth with easing but that's no guarantee. The drop in sales stoked speculation of further easing and that helped to boost gold to a 10-month high and oil to a three-month high on Monday. The question then becomes: When will China's stimulus program start to show up in the data?
The market brushed off the worries in early trading after Trump touted progress on a trade deal. At the same time, there is growing fear the U.S. will pivot to a battle with the EU starting with auto tariffs. The Dept of Commerce is due to report on national security concerns as a justification for tariffs but the White House may keep the recommendation secret for now.
In the U.K., seven Labour MPs quit the party over a shift leftwards, Brexit policy and other grievances. In the big picture, it's further fragmentation of the traditional parties, which are both struggling with internal divisions on Brexit. In the smaller picture, this may free up a handful of Labour MPs to support May's deal rather than face a hard Brexit. Cable certainly wasn't bothered as it rose 40 pips to start the week.