G20: Truce for now - TDS

Analysts at TD Securities point out that the G20 meeting between Trump and Xi resulted in no new tariffs on Chinese exports for now, a decision to restart trade talks, and some concession on Huawei in exchange for US agricultural purchases.

Key Quotes

“The outcome was largely in line with market expectations and our own baseline. The Huawei news suggests that Trump may be more willing to cut a deal.”

“It reduces the tail risk of tariffs increasing on the remaining $300bn of Chinese exports into the US. However, there are few details currently available about what equipment US companies can sell. There is also no timeframe set for further talks.”

“Rates are pricing in 33bp of cuts in July, which implies that the market is still priced for continued deterioration in the economic data. We expect the subdued USD tone to persist as the combination of a dovish Fed and risk sentiment should extend gains elsewhere. The caveat is the extent to which key data this week impacts Fed pricing for July.”