China suggested existing tariffs would be phased out.

Risk conditions were slightly more cautious on Wednesday amid speculation that the US-China trade deal would not be signed until December.

There was a reversal on Thursday in choppy conditions as China suggested existing tariffs would be phased out. Global equities were resilient with US futures at record highs on Thursday after the trade rhetoric.

The US dollar secured limited net gains as other majors failed to generate fresh support, but retreated from highs. European currencies were unable to make headway with EUR/USD near 1.1070.

Commodity currencies recovered some losses on Thursday while the yen retreated as risk conditions dominated. Oil prices dipped after a large inventory build with trade reservations also a negative influence before a recovery on Thursday. Precious metals secured only a limited recovery with fresh losses after positive Chinese tariffs rhetoric.

The dollar was, however, able to maintain support during the day with EUR/USD settling around 1.1070. The US currency gained some support from a more defensive risk tone with gains by default as European and commodity currencies faltered. The Euro remained subdued and EUR/USD traded around 1.1070 on Thursday as German industrial production declined 0.5% with dollar gains limited by positive trade rhetoric.

Sterling was unable to make headway on Wednesday amid subdued trading conditions and a lack of fresh incentives. The Conservative Party had another difficult campaigning day, illustrating that the election outcome was uncertain and the consensus market opinion is that Sterling would decline if the Labour Party appeared to be making headway. Overall, GBP/USD drifted towards 1.2850 while the GBP/EUR dipped towards 1.1600.

There are very strong expectations that the Bank of England will maintain interest rates at 0.75% at Thursday’s meeting. There is a risk that growth expectations will be lowered in the inflation report, but commentary is still likely to be notably restrained given Brexit uncertainty and the on-going election campaign. Sterling drifted lower on Thursday with a slightly weaker risk tone also having a limited negative impact on the UK currency as GBP/USD traded around 1.2850.

Economic Calendar