• An interim deal between US and China is still on the table despite US blacklisting of more Chinese companies. Trump announced he will meet the vice Premier on Friday, which bodes well for the result of trade talks.
  • Another area of tension has opened up in the US-China confrontation with the suspension of NBA pre-season broadcast in China.
  • Brace for another 'lowest growth in 30 years' headline when Q3 GDP is released next week. The headline can be made every year, though, as growth is slowing on a structural basis.

Trump to meet Chinese vice premier is a positive sign

It has truly been a bit of a roller coaster up to the US-China trade talks starting today in Washington. The latest news has been US President Donald Trump's tweet that he will meet China's top negotiator Liu He on Friday, which he has only done when talks have gone well. So this is fairly good news.

Earlier this week, though, US blackliste d another 8 Chinese companies including some of China's top AI companies and suppliers of surveillance equipment in the Xinjiang province. The US also imposed visa restrictions on Chinese officials linked to the detention of Muslims in the Chinese province. China strongly condemned the actions and warned of retaliation. Some sources say China plans tighter visa restrictions for US nationals with ties to anti-China groups. The Chinese foreign ministry spokesman said "stay tuned " when asked if China would retaliate to the US blacklisting of more companies. As if this wasn't enough, another story broke that the White House is considering a limit on Chinese stocks in US government funds. The range of negative news threw cold water on expectations for an interim deal.

However, on Wednesday China signalled that an interim deal was still on the table and FT reported that China would offer to buy 10 million tonnes of US soybeans in exchange for US taking tariff hikes off the table.

Today Bloomberg reported that the US looks to add a currency pact into the interim deal . Supposedly such a pact had been agreed to before the talks broke down and including it in an interim deal might remove one (of many) stones on the way to a broader deal eventually.

Comment: We stick to our view that there is a 60% probability of an interim trade deal. As a minimum, such a deal would include China buying agricultural goods and the US taking tariff hikes off the table again. As we've argued in past weeks, both sides would have an interest in that, see for example US-China Trade - 60% probability of an interim deal , 2 October 2019. The two sides will try to get other things into a deal but it remains to be seen if they can agree on this. The developments have shown again that China separates the trade war track from the confrontations in all the other areas like tech, Hong Kong, NBA etc. The ceasefire between Trump and Xi in December 2018 was also made only a couple of days after the Huawei CFO was arrested in Canada on request by the US.

Download the full report

This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD nears weekly highs as risk-on returns

The EUR/USD pair was dragged higher by a soaring Pound, now hovering around 1.1040. The market is all about sentiment, and this last dependent on Brexit and the US-China trade relationship.



GBP/USD surges to 5-month highs on reports of a draft Brexit deal

GBP/USD has leaped toward 1.28, hitting the highest since May. Reports suggest that the UK and the EU are zooming in on a deal. Details are awaited and negotiations continue.


USD/JPY in search of a firm direction, stuck in a range below mid-108.00s

The prevalent risk-on mood weighed on the JPY’s safe-haven status and extended support. A sharp fall in the US bond yields undermined the USD and failed to impress bullish traders.


Cryptos: Incumbents don't know to play well

The Libra project led by Facebook remains on track despite the first defections. Those who have abandoned the project are mostly payment gateways. Bitcoin's lack of tone weighs on Ethereum's mood.

Read more

Gold slumps to $1,480 area on Brexit hopes

The troy ounce of the precious metal continued to weaken in USD terms in the American trading hours as markets cheered reports claiming that the European Union (EU) and the United Kingdom (UK) are closing in on a draft Brexit deal that could be announced before the end of the day on Tuesday.

Gold News

Forex Majors