Why is risk tone mixed this am after rollback tariffs agreed?

Risk is in the balance…again

Risk is in the balance...again

Ok, so we have had news from China and the US that rollback tariffs will be in play? So everything should be hunky dory, right?


There are reports of fierce internal opposition from the US regarding tariff rollbacks. This is an uneasy agreement, hence the jitters.

The US-China ‘trade war’ is taking on similar proportions to the US-Russia ‘Cold War’. Any talks of ‘Phase 1’ deals are truce’s and not resolution. Who knows which way risk will flip today – just keep your eyes and ears alert. 


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ECB Policy Makers Agreed on Need to Prepare to Ease Policy

© Reuters.  ECB Policy Makers Agreed on Need to Prepare to Ease Policy © Reuters. ECB Policy Makers Agreed on Need to Prepare to Ease Policy

(Bloomberg) — European Central Bank policy makers were united in June on the plan to stand ready to provide more stimulus to the euro-area economy, a move that could be followed by interest-rate cuts as soon as this month.

A number of reports on the economy have deteriorated since that meeting, which may increase the chance of stimulus sooner rather than later. ECB President Mario Draghi has also toughened his language, saying that if the outlook didn’t improve, that would be enough to warrant action.

“There was broad agreement that, in the light of the heightened uncertainty, which was likely to extend further into the future, the Governing Council needed to be ready and prepared to ease the monetary policy stance further,” according to an account of the Governing Council’s June 5-6 meeting.

The ECB isn’t alone in signaling looser policy to come. Federal Reserve Chairman Jerome Powell on Wednesday flagged risks to growth and traders expect at least a quarter-point U.S. cut later this month. The People’s Bank of China is using a varied tool box to push credit into the economy.

At the June meeting, ECB members also reached a general consensus on policy proposals put forth by Chief Economist Philip Lane, though “some nuances were expressed about individual elements of the policy package,” including forward guidance on interest rates and pricing of long-term loans for banks. Some wanted the pricing to be more attractive.

Draghi has said the ECB is willing to consider further cuts to rates or potentially renewing asset purchases if needed. Starting in September there are also plans to provide lenders with an extra infusion of cash in the form of long-term loans.

Some policy makers have set a slightly higher bar for action than Draghi, suggesting that new downside risks would need to materialize. That indicates they don’t want to rush any major decision.

ECB officials said inflation was “seen to remain some distance away from the Governing Council’s inflation aim.” Market-based inflation expectations have fallen steeply this year.

The Governing Council will next meet to set policy on July 24-25 and update their economic projections. Draghi will likely leave office this October as the only ECB president never to have raised interest rates. IMF chief Christine Lagarde is set to succeed him.

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Trump – Xi meeting: US agreed to no new tariffs on China goods

Positive news via China state media (Xinhua, CCTV) on a trade war truce:

  • The US will not levy new tariffs on Chinese goods
  • US and China to restart trade talks
  • US and China trade teams will have talks on detailed issues

US President Trump:

  • We had an excellent meeting with Xi
  • As good as it was going to be
  • thinks “we are back on track” with China

Should be a positive for risk come Monday morning. But do bear in mind this is not a trade deal. Talks to restart. 

Positive news via China state media (Xinhua, CCTV) on a trade war truce:

Still to come this weekend, scheduled for 30 June 2019 at 0100GMT – China official PMIs:


  • expected 49.5, prior 49.4


  • expected 54.1, prior 54.3


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Italian government said to have agreed on new fiscal targets to submit to the EU

Reuters and Bloomberg both reporting, citing an Italian government official

  • Targets will be submitted to Juncker later today
  • Conte is headed to Brussels with “good motivations”


No further details on what the targets are at the moment but we’ll see. If Conte manages to get it anywhere close to 2.0%, I reckon the European Commission could very well just let that slide and carry on with this.

Then again, I will once again reiterate that this is just a target number at the end of the day. If the Italian government still insists on following through with its fiscal measures, then the debt issue will arise once again next year and we’ll have plenty of back and forth between Italy and the European Commission to look forward to.

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