Morning Commentary: Markets - Coming to a Crossroads?

A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.

Markets - Coming to a Crossroads? Share this story: Alan Rose Foreign Exchange Head Trader

Markets remain buoyant and upbeat as the U.S.-China trade talks have been extended for another day and there is growing optimism regarding a successful conclusion to this round of trade talks. This optimism is continuing to fan “risk-on” trading. U.S. and global equities continue to see near term momentum continuing from Friday, and commodity prices and interest rates continue to feel the ripple effect of a short term change in sentiment.   However, last night's Republican and Democratic response to the continuing government shutdown shows little sign of any compromise as the effects of the shutdown continue to spread through the economy.  While the government shutdown is only marginally affecting the economy now, the polarized politics in Washington could have longer lasting effects on the economy and hurt growth even more. Congress needs to ratify the USMCA legislation this year, and if that legislation also becomes politicized and stalls out in Congress, it too could have downstream effects for the economy.   What all this means is that in the short term, the optimism surrounding a successful conclusion to the U.S.-China trade talks will probably continue to power the markets higher. However, the polarizing nature of Washingtonian politics is a potential drag for the economy and will keep markets volatile. Politics and a country’s economic performance can be a combustible formula both here and globally. Remain on guard. HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT: EZ UR fell more than expected dropping from 8.1% to 7.9% in November. That is the lowest level of UR in the EZ since 2008. The euro is slightly stronger today trailing the outperformance of the commodity linked currencies. The Bank of Canada meets later this morning and is expected to keep rates unchanged at 1.75%. The Canadian dollar has been on a roller coaster ride over the past few months reflective of rapid changes in oil and commodity prices. The Canadian dollar is higher for the seventh day in a row; markets will be paying very close attention to the Bank of Canada’s language regarding the economic outlook, growth, and inflation forecasts.

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:

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 ©2019 City National Bank – All Rights Reserved. 350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071 City National Bank is a subsidiary of Royal Bank of Canada. TERMS & CONDITIONS  |  PRIVACY STATEMENT NMLSR ID# 536994 | City National Bank Member FDIC