Markets too hopeful of a Xi-Trump deal – Nordea Markets

According to Tuuli Koivu, Research Analyst at Nordea Markets, one driver of the stronger dollar year-to-date is the escalation of the trade war.

Key Quotes

“If the G20 meeting ends without any signs of progress, it is likely to be a disappointment for the market, especially with regards to China and EM Asia.”

“As a consequence, the possibility of further USD strength and a likely setback to risk sentiment will make for a dovish read-through to Fed Funds pricing as well as to US Treasury bonds (lower yields), at least temporarily.”

“In short, we judge that some chance of a postponement of the tariffs is already priced in.”