Better sentiment on a U.S.-China trade deal kicked off the week but be warned that it could all fall apart in a moment. The U.S. dollar led the way while the pound lagged. Powell speaks on Tuesday. The DAX trade was locked in at a gain and a new Index trade was opened.
White House advisor Kellyanne Conway said on Monday that it looks like the U.S. and China are getting closer to a deal. High-level talks will take place Thursday-Friday but lower level meetings have already begun so expect a steady stream of rumors and reports.
The rule of thumb on negotiations is that they're always toughest at the end. They often look like they may fall apart before there is a deal. Trump and Xi have both privately pushed for compromise but the 'generals' of the negotiations might be less flexible and the latest market moves could evaporate. The U.S. dollar strengthened to start the week as equities and yields rose. Gold fell $6 on slipping demand for safety. Flows may also have been a factor with China returning from a week of holidays and Japan finishing up a long weekend.
Looking ahead, an event to watch will be a speech from Powell at 1745 GMT Tuesday. The topic is rural poverty so it may shy away from monetary policy but it's also the kind of topic that lends itself to dovish undertones so watch out for U.S. dollar selling. The RBNZ decision is also due early Wednesday.