Sweeter deal

The Trump administration took China off its watchlist of currency manipulators ahead of the scheduled signing of the phase-one trade deal on Wednesday, a move that was greeted with a mixture of relief and wariness. Traders cheered the move, pushing the yuan to its strongest close in almost six months, but policy wonks were skeptical about a declaration that was timed to coincide with a detente between Washington and Beijing. They worried that the currency designation would become a diplomatic bargaining chip, undermining its significance in foreign-exchange markets.

Not quiet on the Western front

With America set to enter a truce in its trade war with China, tensions on the Western front are heating up. The European Union’s new trade chief Phil Hogan will be in Washington for the next three days trying to head off a transatlantic commercial war, to safeguard Europe’s auto industry from much-dreaded tariffs. For the White House, threatening levies might be one way to win European compliance with its hard-line stance on Iran. U.K. Prime Minister Boris Johnson has also come under pressure after senior U.S. officials visited London on Monday to urge the British government to drop Huawei Technologies Co. as a supplier of equipment for its 5G broadband networks. They cited concerns that intelligence-sharing with America could be jeopardized by such a network.

Wall Street earnings

Citigroup Inc. and JPMorgan Chase & Co. will kick off earnings season Tuesday, delivering reports that will serve as a barometer for Wall Street and a gauge of how much juice is left in bank stocks that have posted a stunning 36% gain in 2019. Yet analysts expect the sector to see a combined profit drop of $10 billion this year, as global interest rates remain low and geopolitical tensions high. Trading revenue may deliver the bullish headlines: Results will get a boost from comparisons to the final tumultuous months of 2018. Both JPMorgan and Citigroup executives said in December that the fourth quarter was a good one for their trading desks.

Bullish markets

Overnight, the MSCI Asia Pacific index and Japan’s Topix both added 0.3%. In Europe, the Stoxx 600 Index was little changed as of 6:06 a.m. S&P 500 futures pointed to a lower open, the 10-year Treasury yield was at 1.837% and gold lost 0.2%.

Coming up…

The main data today is the inflation report at 8:30 a.m. Headline price pressures probably accelerated to 2.4% in December from 2.1%, with the core rate remaining at 2.3% and effectively consistent with the Fed’s range. With GDP growth poised to settle in the vicinity of 2%, the risk of a material overshoot of the price-growth target remains low. New York Fed President John Williams speaks in London, while Kansas City Fed President Esther George discusses the economic and monetary policy outlook.