European markets managed to gain a bit of a respite yesterday on hopes that the arrival of Chinese vice premier Liu He in Washington today would be the precursor to some form of trade deal ahead of the weekend.

This optimism translated itself into a rebound for US markets as well, after President Trump tweeted that Chinese officials were coming to the US to make a deal on trade.

While it would be nice to believe the hope and hype, yesterday’s reports that Chinese officials had made large scale systematic edits to a 150-page trade treaty draft, prompting accusations of backtracking by US officials, would appear to suggest that the bar to any form of deal by the weekend is so high, you wouldn’t be able to vault over it.

This was more or less confirmed by President Trump when he addressed a rally in Florida, when he said that China “broke the deal” and would have to pay. He went on to say that the US wouldn’t back down until China “stops cheating our workers and stealing our jobs”.

We also found out the detail of the new set of tariffs which were published yesterday and will be implemented as from Friday, and which will, in all likelihood, prompt retaliatory measures from the Chinese.

When you consider as recently as last week how expectations were rising that we might see some form of agreement ratified later this month, the events of the last few days has raised the prospect that the toing and froing of the last few months was nothing more than political theatre, and that we are still some way away from any sort of deal that could meet market expectations.

US markets managed to close off their lows last night on expectations that the visit of the Chinese delegation would prompt a dialling back on the recent market angst. This seems unlikely given that thus far we haven’t really heard anything from the Chinese about the events of the last few days.

As a result, events leading up to the weekend could see markets gyrate in either direction, but for now markets in Asia are sharply lower, and that’s before we even consider what the US has done in relation to new Iran sanctions.

Last night the US administration announced new sanctions on the Iranian economy, this time targeting the metals sector, which accounts for about 10% of the country’s exports. The sanctions would be targeted at industrial metals, namely iron, steel, copper and aluminium.

Looking ahead to today’s European session, markets look set to follow markets in Asia and open slightly lower, with most attention focussed on events in Washington DC.

On the IPO front, management of Uber are likely to be shifting uncomfortably in their seats ahead of today’s setting of the IPO price, for tomorrows stock debut. Initial reports would appear to suggest that the pricing could well be towards the lower end of the $44 to $50 price range.

This appears much more likely given the performance of its smaller sector peer Lyft’s shares yesterday, as they dropped another 10% to close at just below $53, another new low, and almost 20% below its IPO launch price.

With short positions on Lyft building up by the day, Uber management may find themselves in a similar situation in a few days’ time if the scepticism around Lyft’s valuation starts to seep into the markets mindset around Uber’s similarly unrealistic price tag.

EURUSD – finding it difficult to push above the 1.1230 area and while below the risk remains for a move back to support at the 1.1110 level. Bias remains to the downside while below the upper 1.1325/40 resistance area, with the potential for a move towards the 1.1000 level.

GBPUSD – support remains near the 1.2980 area and last Fridays low. A break below 1.2960 could well open up a move towards the 1.2800 area.

EURGBP – appears to be heading towards resistance at the 0.8620 area. A break through 0.8630 suggests 0.8680 and recent range highs. While below 0.8630 we could see a return to the 0.8480 area.

USDJPY – slipped below the 110.20 area opening up the risk of a move towards the 109.20 area. While below 110.30 the risk has shifted to the downside. Above 110.30 argues for a move back towards 111.00.

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