US-China Trade Breakthrough?

12/05/2019 1:26 pm EST

Focus: FOREX

Adam Button

Co-Owner and Managing Director,

A potential wild card gets thrown into on-again/off-again trade talks and a forex update from Adam Button.

It's impossible to separate fact from fiction with all the noise in the China-US trade talks, but a report this week was notable for an intriguing detail. 

The ebb and flow of US-China trade talks has been relentless but fruitless. Early in the week there was skepticism but it turned on Wednesday on a sources report saying there was progress. But a report from earlier in the week was notable for a fresh detail. It said that President Trump’s son-in-law Jared Kushner had gotten involved the US-China trade talks.

Normally that would be a meaningless detail but Kushner got involved late in NAFTA talks when it looked like they could go off the rails. He eventually brokered a deal where Canada would give up some dairy market access in exchange for maintaining trilateral dispute resolution panels.

At the time U.S. negotiator Robert Lighthizer stated, "I've said before, and I'll say again, this agreement would not have happened if it wasn't for Jared." 

Kushner is one of the few people Trump trusts and is said to act as an interpreter for what Trump is willing to accept in a final deal. We cannot say with any confidence that this is a genuine sign we're in the final stages, but it's worth considering. At the same time, we fear that even if there is a deal it will be superficial at best with the risk of a sell-the-fact reaction.

FX & Energy Notes

In more-concrete news, the Bank of Canada followed in the Reserve Band of Australia's footsteps with an upbeat take on growth and the global economy. That sent USD/CAD a full cent lower.

The Canadian dollar (CAD) and British pound (GBP) are leading the gainers for the second consecutive day, while the New Zealand dollar (NZD) powered ahead after the Reserve Bank of New Zealand confirmed rates would remain on hold.
Below is the chart highlighting the improving correlation between EURUSD and the Eurozone-US spread of their respective economic surprises, using Citi economic surprise index.

Kushner a Tell? - Citi Index Eu Us Dec 5 2019 (Chart 1)

In the UK, the bleeding has stopped for Conservatives in the polls as they stabilize with roughly a 10-point lead, something that would mean a comfortable majority. That news and the breakout of a bull flag on the chart, led to a 100-pip rally in cable.

Looking ahead, the two-day OPEC meeting gets underway in Vienna today. The leaks and reports have already been too many to count. Talk has ranged from Russia balking at any commitments to a deeper cut. The baseline is for a three- to six-month extension of current quotas but expect it to be accompanied by fresh commitments to meeting the current quota from the countries that are over-producing. The technicals will tell the story and it will take a clean break above recent ranges in WTI and Brent to leave a lasting impression. 

Adam Button is co-owner and managing director of and a contributor at You can see Ashraf’s daily analysis at and sign up for the Premium Insights. Ashraf's Tweet on indices here.

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