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The trade war front

​​​​​Today's news headlines:

  • ‘US makes final plea to Johnson to block Huawei from 5G network’.  Yesterday, US representatives travelled to London to make the argument that there was no way the UK could mitigate security risks from Huawei’s supply equipment for its 5G network. Supporters for the technology argue the it can be used in non-core areas in ways that keep the network secure. (Bloomberg)
  • ‘Lobby groups asked to return no-deal Brexit cash’. Various trade organisations were paid a total of £10 million to help prepare for a no-deal Brexit last October, but now Johnson’s government are trying to claw back some of the cash since the risk event never happened. It’s thought that most of the emergency cash has already been spent. (Financial Times)

New target acquired

After a rollercoaster 2019, ties between the US and China have finally simmered down to the point where forward progress is seen as inevitable. The cost of the conflict has been substantial though; according to yesterday’s data, China’s trade with the US fell by almost 11% in Yuan terms during 2019. Looking ahead, the agreed phase-one trade deal between the two countries is due to be signed this week. In advance of the event, the US has removed China from its list of currency manipulators, citing ‘enforceable commitments’ to not devalue the Yuan, which caused it to appreciate to a six-month high against the Dollar.

Fear not, Trump’s ‘America First’ agenda means it shouldn’t be too long until we see further developments on another trade-war front, Europe. The EU’s new trade chief will be in the US capital for the next three days, with a mandate to mend ties between the world’s biggest economic partners. There’s already a slew of disputes on the table: steel and aluminium, Boeing, Airbus, French wine, German autos, Harley-Davidson and Levi’s jeans to name a few. Most recently, the US has aimed levies against French goods, ranging from cheeses and handbags, in retaliation for a digital services tax that targets tech companies Google, Apple, and Amazon. The prospects for progress look slim, which could keep an already battered European manufacturing sector under pressure in the coming year.

Bottom line: In all honesty, we might be kidding ourselves thinking 2020 will be clear waters and a return to prosperous growth conditions. Trump is forever looking for his next win, and if his sights are set on Europe, there’s not much the world can do other than watch it play out, hoping it doesn’t last too long. It’s anyone’s guess what’s in store for the UK when he’s done with Europe…


Cable has extended its longest losing streak since May as speculation surrounding a Bank of England interest rate cut increases. This morning, the pair reached lows of 1.2955 on the London open following yesterday’s close below the pair’s 50-daily moving average. Johnson’s comments this morning claiming a UK-EU trade deal is very likely have failed to boost Sterling sentiment, implying that UK fundamentals are back in the driving seat for the British currency.


The trade-weighted Euro Index is edging towards the top end of its two-month trading range, and the Sterling Index is drifting towards three-week lows, causing the currency-cross to drop sharply. The pair has fallen almost 1.5% since last Friday and risks further losses today with a lack of fundamental data to support Sterling.


Yesterday, the common currency extended recent gains, closing above the Euro Index’s 50-daily moving average and tested the 100-daily moving average – a level that equates roughly to 1.1150 in EUR/USD. This afternoon’s US inflation data, as well as commentary from Fed member Williams, may bring some intra-day volatility for the pair, but is likely to remain range-bound in the short-run.