German data points to recession & UK Supreme Court ruling ahead

Trade wars: Overnight there were headlines that China was granting waivers for tariff-free soybean purchases – which boosted sentiment and equities. However, until a solid resolution is found, the global trade story will weigh on sentiment, adding negativity to the global growth story.

 EUR: Factory orders in Germany posted an enormous decline yesterday, pushing the fear of a German recession into the spotlight. "The numbers are simply awful. All the uncertainty around trade wars, the outlook for the car industry and Brexit are paralyzing order books," said IHS Markit's principal economist Phil Smith.

 EUR/USD sitting around 1.1000 is threatening to push lower through. GBP/EUR is benefiting, loitering with intent at 1.1300 whilst domestic politics in the UK has pushed a No-Deal slightly further away from reality.

 Early morning IFO business data will need to be a huge upside-surprise to bring any confidence back to the EUR.

 GBP: all eyes on this morning’s Supreme Court ruling about the legality of the proroguing of parliament by PM Johnson. GBP/USD important levels 1.2400 / 1.2345 / 1.2320 & 1.2480 / 1.2530

 General: The BIS (Bank of International Settlements) yesterday called the growing acceptance of negative rates vaguely troubling, because if an economic downturn kicks in, the monetary AND fiscal policy will be required to help economies out of recession.

It also noted that the movement of the US yield curve is not the only indicator of a US recession and other market indicators were contrary to this.

 AUD: Treading water ahead of Governor Lowe’s speech tonight in which is expected to signal a rate cut very soon.

 Sweden: Some downbeat comments from the Central Bank this morning, noting that economic activity is entering a ‘calmer phase’ and there are risks from Brexit and the bubbling trade wars. Sweden is joining the rest of the world in recognising a tough environment for global activity.