Morning Commentary: Europe Up – Asia Down

Foreign Exchange - Morning Commentary

Europe Up – Asia Down

Share this story:
Facebook
Twitter
LinkedIn
Email
Alan Rose
Alan Rose
Foreign Exchange Head Trader
As we arrive this morning, European currencies (majors and emerging) are generally all stronger while Asian currencies are steady to lower with the South Korea won and Indian rupee down the most approaching 1%. The main cause of this dynamic is the fact that the Trump administration appears to be close to announcing a 10% tariff on Chinese goods. While this is an improvement from the potential announcement of 25% tariffs, it puts in jeopardy whether there will be any U.S. – China trade talks.
 
Asian equities all in the red this morning (Japan closed for a holiday) with the Hang Seng down 1.30% and the Shanghai Composite down by 1.11%. The Shanghai Composite index is near its lowest level in four years. While Asian equities overall remain highly concerned about future trade and growth prospects centered on China, the Chinese yuan continues to remain remarkably stable since the beginning of August after falling sharply in June and July.
 
We have spent a lot of time discussing the future course of trade and trade deals with China and NAFTA getting most of the attention. Behind the scenes, interest rate differentials between the U.S. and Europe and the U.S. and Japan continue to widen out and should be causing the U.S. dollar to outperform but in the short run, those signals are being ignored. U.S. - German 2-year spreads are at near 332 bps – that is the widest spread since 1990. U.S. – Japanese 2-year spreads are at 288 bps – the most since 2006 and are up by 85 bps this year and the Japanese yen is actually stronger since the beginning of the year.
 
Between the on again and off again trade talks and lack of historically relevant interest rate correlations, this makes for a difficult time predicting and forecasting short and medium term moves in the currency markets. We do not foresee an end in sight and anticipate foreign exchange markets to remain difficult to predict and continue to encourage our clients (importers and exporters) to remain tactical and not strategic at this time…take advantage of the opportunities when they arise.
If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Investment and Insurance Products:
Are Not insured by the FDIC or any other federal government agency
Are Not deposits of or guaranteed by a Bank or any Bank Affiliate
May Lose Value
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. The Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to bank@banking.offers.report. Please do not reply to this email. To ensure the delivery of future emails, please add foreignexchange@emails.cnb.com to your email address book or safe sender list.
Copyright ©2018 City National Bank – All Rights Reserved.
350 South Grand Avenue, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
TERMS & CONDITIONS  |  PRIVACY STATEMENT
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC
                                                           

Comments

Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?