Lighthizer reminds markets the trade war is far from over

US Trade Representative Robert Lighthizer gave financial markets a reality check after reminding us a trade deal with China is not forgone conclusion.  The Dow declined for a second consecutive day and technology stocks saw an end to their 12-day winning streak.

Lighthizer/Cohen/Powell – China deal not done yet

GBP -Parliament supports May’s pledge on no-deal

US GDP – Spread between 10s and 2s continue to widen

Oil – Crude imports fall to lowest since 1996

Gold – Continues to drift lower


Testimonies from US Trade Representative Lighthizer, Fed Chair Powell, and former lawyer to the President, Michael Cohen provided many headlines that basically saw US stocks trade little changed and the dollar slightly firmer.  The financial markets focused more on Lighthizer’s cautious comments that increased Chinese purchase of American goods is not enough to make a trade deal.  While both sides are motivated to finalize a trade deal, it is unknown how they can enforce a deal on currency manipulation, intellectual property and forced technology transfers.

Trump’s former lawyer attacked the President and his testimony went as expected between Democrats and Republicans.  Cohen did not give any direct evidence on collusion.

Fed Chair Powell reiterated the patience stance the Fed will have in the coming months and also signaled we can expect to hear from them soon on how they will end the balance sheet unwind.


The British pound rose for a fourth consecutive day after Parliament voted on several amendments that ultimately suggest Brexit would be delayed.  Labour lost their amendment to remain in the customs union with the EU, thus prompting their policy to support a second referendum.   The Scottish National Party’s amendment to rule out leaving the EU without a deal in any circumstance was rejected, so technically we could still have a no-deal Brexit but that is highly unexpected.  The Cooper Amendment did pass and formalized PM May’s pledge on a no-deal Brexit, which would likely see Article 50 extended.

Brexit will go down to the wire and the next key date is the March 12th vote on May’s Brexit deal.  If she loses that vote, we will see a vote on a no-deal Brexit on March 13thand if that is rejected, we will see a vote on the March 14th to extend Article 50.


The fourth quarter release of US GDP could be a critical turning point for rate cut expectations.  The US economy was definitely softer at the end of the year and expectations are for the quarterly GDP to fall from 3.4% to 2.2%.  The current range of estimates are 1.4% to 3.0%.  Heading into the data, expectations have grown for the Fed’s next move to be a cut, with the interest rate implied probabilities seeing a 33% chance of a rate cut at the January meeting in 2020.  Treasury yields have been rising and the spread between 10-year and 2-year Treasury yields have widened to 18.6 basis points, easing concerns of seeing yield curve inverted.  Fears of the inversion peaked in December with the spread narrowing to 10.9 basis points.


The EIA reported that commercial crude imports to the US fell to a two-decade low.  The battle between OPEC and President Trump will likely intensify as oil regained its firm footing.  US production will continue to rise but in the short-term Saudi Arabia’s signal that production cuts from OPEC will continue for the rest of the year and could keep a bid with oil prices in the short-run.


The precious metal’s recent consolidation is supported by the indecision the financial markets have in pricing in what will be the Fed’s next move.  The data dependent Fed will clearly be patient in signalling their next move and gold may struggle climbing higher until we see further deterioration with US data that would seal the markets expectation for the next move to be a rate cut.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.