US lower as Huawei charges threaten trade talks

Curious time for charges against Huawei

We’re seeing mixed trade in Europe on Tuesday, with US futures marginally lower as trade talks with China face a potential setback, while the UK prepares to vote on a raft of amendments to Theresa May’s plan B.

Trade talks between the US and China appeared to be going rather well until last week when speculation started circling that a preparatory meeting prior to Liu He’s visit this week had been cancelled. While this was denied by Larry Kudlow, it was followed by claims that the two sides are miles and miles from a deal and now another spanner has been thrown in the works, with the US filing numerous charges against Chinese telecom giant Huawei.

Huawei has long been a target of the US so these charges aren’t necessarily surprising but the timing of them is curious. For now, it threatens to ratchet up tensions between the world’s two largest economies, as they work towards a deal that prevents further tariffs and ideally removes those already imposed. Only time will tell whether the charges damage negotiations or serve as a tool to progress the talks.

EUR/USD – Lack of fundamental releases leaves euro subdued

GBP pares gains ahead of parliament Brexit votes

In the UK, parliament convenes today to discuss and vote on amendments to Theresa May’s plan B, with a variety of options being considered by the speaker including those that make a no-deal Brexit less likely. It’s difficult to say whether the UK will be in a better or even a clearer position by the end of the day, with the amendment that has May’s support being one that simply forces her to back to Brussels to push for changes to the backstop.

This has not been a successful tactic in the past, with the EU claiming it has no desire to reopen the withdrawal agreement, which is perhaps why May favours it as it ultimately protects her deal. May’s recent record in parliament isn’t great, with her only victory of note being a marginal win following the vote of no confidence in her government. Perhaps her backing is the poisoned chalice that Graham Brady as his fellow Brexiteers would have rather done without.

Commodities Weekly: Palladium retreats from record highs

The pound has been paring its gains in recent days in anticipation of the vote having previously made strong gains. The fading prospects of no deal as MPs rallied in opposition to it has clearly benefited the currency, lifting it to more than three month highs against the dollar and looking more than capable of building on this. We’ve seen some profit taking ahead of the vote around 1.32 but 1.33 marks a real test for the pair, having providing significant resistance throughout the second half of last year.

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.