US-China trade deal to guide the FX markets – Danske Bank

According to analysts at Danske Bank, US-China trade deal is likely to come sometime before the end of Q2 and expect it to be extensive.

Key Quotes

“We look for a deal to, among other things, largely roll back tariffs. A trade deal would support a recovery in China and emerging markets and stabilise euro-zone growth at a time when past monetary easing also starts to support.”

“In FX markets, we expect a trade deal to support commodity currencies versus notably the JPY through both the China and the risk channel. EUR/USD should also see support in 3-6M but the initial reaction could be somewhat muted; a break of recent ranges is not in the cards.”