Wall Street overturned early losses of yesterday to close up, with the S&P 500 ending 1.2% higher. The turnaround followed reassuring comments from White House National Economic Council Adviser Larry Kudlow who said that ‘I think we’re going to come to agreements’ [with China]. He also went on to tell Fox News that he believes the Chinese will ‘back down and will play ball’ whilst sentiment was also helped by comments from Commerce Secretary Wilbur Ross signalling that the door was open for a negotiated solution with China on trade. After the worries that followed China’s response to the US proposed list of tariffs (China hit back yesterday morning announcing an additional 25% tariff on 106 US products (around $50bn of US imports), including soybeans, cars and chemicals), both sets of comments have proved to be important in settling risk sentiment, albeit until we hear more from both sides in what looks set to be a drawn-out negotiation.

In terms of Fed speak, Bullard reiterated his dovish views and noted that current monetary policy settings are close to neutral and therefore it is not necessary to raise the policy rates further. On the recent US/China trade frictions, he noted that it increases the uncertainty around economic forecasts and more uncertainty is likely to keep longer rates lower. Staying in the US, the March ADP employment change was above expectations at 241k (vs. 210k) and broadly similar to readings over the past three months. Normally, markets look out for the ADP figure as an indication of what the NFP number may come out as. Since December, the ADP number has been fairly smooth, fluctuating between 241k-250k. On the other hand, the NFP figure has been fairly volatile ranging from 175k-313k. So yesterday’s strong ADP figure may not be a good indicator of this Friday’s NFP reading.

In Europe, the March core CPI release was below market consensus at 1% YoY (vs. 1.1% expected) for the third consecutive month. Elsewhere, the Euro area’s February unemployment rate was in line at 8.5% and marked a fresh 10-year low.

The day ahead

Looking at the day ahead, we have a fairly quiet calendar day. This morning in the UK we have the March Services and Composite PMI followed by the Services and Composite PMIs in Europe. Do note that Chinese markets are closed for the remainder of the week for Tomb Sweeping Day.

Thought of the day

Family holidays and those never-ending car journeys are enough to make anyone lose the plot but be thankful you haven’t left your kids at a motorway service station, 500km from home. This was the accomplishment of a German man who is being dubbed “dad of the year” after he returned to his minibus and continued driving, unaware that his two daughters had gone to the bathroom, only to then receive a call 90 minutes later from the police. In fact, they called his mobile 48 times before he answered, with him seemingly so fixated on driving. As the father raced back for them, the kids were treated to a full brekkie by the thoughtful service station staff and everything was resolved in due time. Sometimes we get so caught up in our day-to-day, the things that really matter can easily pass us by. We at Investec like to think of ourselves as your eyes and ears in the FX markets so as you run your business, we support you in this respect. To give us a guide as to your future plans and what levels you’re targeting so we can best help, give our dealing desk a call on 0800 055 6339 today.