The UK PM Johnson’s office released a statement on Saturday, citing that Queen Elizabeth will make a speech on Thursday, setting out Johnson’s legislative agenda following his commanding election victory, per Reuters.

Further Details:

“The so-called Queen’s Speech is used to detail all the bills the government plans to enact over the coming year.

The Queen’s Speech will also detail plans to provide a better service for rail commuters, greater protection for people who rent their homes, and stop local authorities boycotting products from other countries such as Israel.

The restoration of devolved government in Northern Ireland after a near three-year hiatus and “a strong United Kingdom” will also be a focus of Johnson’s government.”

Meanwhile, the Cable settled below the 1.3350 level on Friday, reversing more than half the rally to nineteen-month highs of 1.3515 reached amid a landslide Conservatives victory in the UK election.

The pound may continue to remain supported in the coming days, as Johnson’s win is seen as paving way for a swift Brexit before January 31st, 2020.

Reuters reports the recent comments from the Chinese government's top diplomat Wang Yi on the US-China initial trade deal, delivered during a visit to Slovenia on Saturday.

China and the United States' "phase one" trade agreement is good news for all and will "provide stability in global trade"

The agreement "will help to shore up confidence in (the) world economy".

"China never believed that resorting to tariff hikes is the right way … because there is no winner in a trade war," he said, adding his country was opposed to protectionism.

  • US Treasury Sec. Mnuchin: Details of US-China “phase one” trade deal to come out over weekend
  • US Pres. Trump: Won't wait for 2020 election to start phase-two negotiations

Speaking at the Doha Forum conference in Qatar on Saturday, the US Treasury Secretary Steven Mnuchin said that a factsheet on US-China "phase one" of a trade deal will be released either on Saturday or Sunday.

Additional Comments (via Reuters):

The accord with China aims to create more reciprocal trade relations for many years, and that it would be "very good" for global growth.

On accusations over weaponizing the US dollar, he rejected them and said that if it was not careful with sanctions, people would start using other currencies.

  • WH Adviser Kudlow: Deal should be signed inside of a few weeks

North Korean state news agency KCNA reported on Saturday, North Korea conducted another test at the Sohae satellite launch site on Friday. It was the second such test at the facility in a week, as cited by Reuters.

The tests come ahead of a year-end deadline North Korea has outlined for the US to drop its pressure on the North over denuclearization.

  • North Korea: Tested super-large multiple rocket launcher under leader’s guidance– Yonhap

According to three sources with knowledge of the outcome of China’s annual closed-door Central Economic Work Conference, said that Beijing plans to set a lower economic growth target of around 6% in 2020 from this year’s 6-6.5%, Reuters reports.

A source noted: “We aim to keep next year’s growth within a reasonable range, or around 6%.”

Economic growth of nearly 6% next year could be enough to meet that goal given the economy is expected to expand about 6.2% this year, the policy insiders said.

The reports of China bumping up efforts to boost growth could offer a fresh lift to the domestic stocks as well as the Chinese yuan. However, the main market drivers would remain the risk-on flows induced by the trade deal optimism.

In an interview with CNBC late-Friday, White House economic adviser Larry Kudlow shared key insights on the US-China Phase One trade deal agreed.

It should take place "inside of a few weeks".

Hopefully we will be resolving some of the unfair trade practices.

There is an enforcement process embodied in this phase one agreement, if a complaint is involved it will go to staff, then deputies, then principles. If it's not resolvable action will be taken.

Phase Two starts immediately.

There's a section in the IP area on counterfeit goods.

There's a section that prohibits technology transfers.

Agricultural purchases in $40-$50B range is over a two-year period.

Meanwhile, CNBC’s Kayla Tausche reported the key comments on the trade deal by the US Trade Representative Lighthizer.

86 page deal would be signed by ministers in Washington, not Pres. Trump and Pres. Xi.

No new tariffs will be put into place as long as 2 parties are abiding by that agreement in good faith.

The purchases portion is about $200 billion of purchases from China. Would include agricultural, manufacturing, and energy products.

China will purchase $40 billion of agriculture and work toward buying $50 billion.

Expects Phase 2 negotiations to begin immediately. Will not wait until elections to start phase 2.

Keeping amount of specific goods private.

There will be a fact sheet released today with more details of the deal.

The official deal is expected to be made public sometime over the next couple weeks.

The Wall Street indices jolted higher in an initial reaction to the Phase One trade deal reached but quickly gave in the gains and finished the day flat, as the details of the deal appeared to disappoint the markets.

On Monday’s Asian open, the market mood is likely to remain elated amid trade and Brexit optimism. “Prime Minister Boris Johnson called on Friday for “closure” over the Brexit divisions that have driven the United Kingdom, saying his election victory provided an overwhelming mandate to take Britain out of the European Union on Jan. 31”, per Reuters.

  • EUR/USD erased most of the intraday gains on Friday but ends the week mostly up.
  • Resistance is seen at the 1.1155 and 1.1178 price levels.

EUR/USD weekly chart

EUR/USD is trading in a weak bear trend below the main SMAs. The market is attempting to stabilize above the 1.1000 handle. A break above the 1.1200 handle would be seen as fairly bullish.

EUR/USD daily chart

After hitting its highest level since August 2019, EUR/USD erased gains and rejected the 200-day simple moving average (DMA). The market remains very choppy in the 1.1000-1.1200 zone.

EUR/USD four-hour chart

The market might be creating a head-and-shoulders pattern. Therefore a retest of the 1.1155 level can be likely. However, a break below the 1.1090 support can lead to more weakness towards the 1.1062 and 1.1027 price levels, according to the Technical Confluences Indicator.

Additional key levels

  • DXY recovered from multi-month lows on Friday but it is still struggling below the 200 DMA.
  • Support is seen at the 97.00 and 96.70 levels.

DXY daily chart

DXY (US Dollar Index) spiked down to its lowest since July and then recouped some of the lost ground. However, the index remains fragile while below the 200-day simple moving average (DMA).

DXY four-hour chart

Although the market is retracing up, DXY remains under bearish pressure below the 97.55 resistance and the main SMAs. Next week bears might try to have another chance at the 97.00 handle. Further down lie the 97.70 and 97.50 price levels.

DXY 30-minute chart

DXY bulls would need a breakout above the 97.55 resistance and the 200 SMA. Looking up, the next resistance probably lies near the 97.85 level.

Additional key levels

Next Thursday, the Bank of England will announce its decision on monetary policy. No change in rates is expected, particularly after the results of the general election in the United Kingdom. According to analysts at Wells Fargo, the central bank will remain on hold for the foreseeable future.

Key Quotes:

“The Bank of England (BoE) announces its latest monetary policy decision next week and is widely expected to hold its bank rate steady at 0.75%. In its November announcement, the BoE held rates steady but two officials unexpectedly voted for a rate cut. The committee’s comments following the announcement suggest it is split on the next monetary policy action.”

“Price pressures eased in October, as U.K.’s headline CPI figure rose just 1.5% year-over-year, dipping to a near three-year low, while core CPI inflation held steady at 1.7% year-over-year, still below the central bank’s 2% target. Meanwhile, U.K. GDP stagnated in October, suggesting a slow start to the fourth quarter. Given the soft inflation and growth figures, combined with some uncertainties on longer-term E.U.-U.K. trade talks now that the Conservative party secured a majority in Parliament, we expect the BoE to remain on hold for the foreseeable future.”

Analysts at MUFG Bank argued that further gains in the pound (GBP) will prove more challenging as volatility eases.

Key Quotes:

“The reduction in Brexit and political uncertainty has encouraged a stronger pound with cable briefly rising above 1.3500 and EUR/GBP below 0.8300. However, it may be as good as it gets for the GBP for now. The positive election result appears well priced into the GBP.”

“The initial discussions are unlikely to be as market moving for the GBP whose recent elevated level of volatility is set to fade. It could allow the GBP to be driven more by economic fundamentals again. Market participants are optimistic that the UK economy will rebound early next year after hitting stall speed in recent months and further boost the GBP. However, it will be tested by the incoming UK data flow."

“If weak growth proves more persistent than expected it will encourage the BoE to move closer to a rate cut in 2020. We expect the BoE to maintain a dovish policy signal at next week’s policy meeting in light of weaker than expected growth so far in Q4, although they may acknowledge that downside risks have eased in response to US-China trade deal optimism and the positive UK election result. In these circumstances, we believe that the GBP will find it more challenging to extend its advance in the near-term. A lot of the good news has already been priced into the GBP after it strengthened sharply by 13% against both the USD from the September low, and the euro from the August low.”

“The pound is also set to become less volatile after the period of pivotal event risk has now passed. Another dovish BoE policy update could remind market participants that the direction of the GBP is not a one way street. Downside risks will build if UK growth continues to disappoint.”