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European update – Cautious optimism continues

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Markets in wait and see mode

The G20 is finally underway and investors are now sitting and waiting in anticipation of whether talks between Trump and Xi can yield a positive outcome. Or has all the rhetoric of the last few weeks been for nothing.

Source – Thomson Reuters Eikon

Unfortunately for investors, the meeting between the two President’s won’t take place on Saturday morning which makes today’s trading session all the more interesting. I guess by market close we’ll know just how optimistic investors are because the rest of the weekend may feel like a long time if talks go badly.

That’s assuming of course that people expect the stock market to fall in the event of talks collapsing. They recently hit record highs on the expectation that the Fed will cut rates two or three times before the end of the year, which you would expect is conditional on a deal not being reached. If talks collapse, the Fed will be backed into a corner and almost forced to follow through on rate cuts.

Most people seem to think progress will be made in Osaka though, although not to the extent that a full trade deal is agreed. A truce on tariffs is the base case, with negotiations restarting on the basis of previous deal breakers having been compromised on.

Of course, when you’re dealing with someone as unpredictable at times as Trump, base case scenarios seem a bit pointless but I guess we’ll see just how much desire there is on both sides to get a deal done.

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Former Craig

Former Craig

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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