Morning Commentary: Land of the Rising Sun

Foreign Exchange - Morning Commentary
Land of the Rising Sun
Share this story:
Andrew Kositkun
Andrew Kositkun
Foreign Exchange Head Trader
President Trump spent the holiday weekend in Japan and attended multiple events with Japanese PM Abe.  The four day trip appeared to focus more on pageantry rather than resolving the key differences between the two countries. 
While a trade agreement was not reached on the trip, President Trump did indicate the possibility of a deal being reached by August which, if realized, will conclude talks much earlier than the six-month timeline that he laid out earlier.  President Trump has been focused on the trade surplus that Japan carries with the US, with focus on automotive trade as well as greater access to the Japanese market for American farmers. 
On the Japanese side, PM Abe confirmed that both sides have agreed to accelerate talks and aim for a “win-win” result.  While meetings between allies tend to result in constructive comments regardless of the extent of actual progress, President Trump’s stance with Japan appears to be in line with the US’s evolving stance of maximum pressure on Japan and a pivot from other trading partners.  Over recent weeks, the US de-escalated tensions with the EU (delayed auto tariffs), Canada and Mexico (reached an agreement to remove steel and aluminum tariffs) while ramping up both tariff and non-tariff barriers against China. 
In the end, trade talks with Japan remain fluid.  However, it is important to note that trade talks with Japan are fundamentally different than trade talks with China, which involve much more structural issues.  This means that while an agreement with Japan isn’t an easy thing to reach, it is certainly a much easier task than with China.   
  • EU parliamentary election results were a bit of a mixed bag.  While populist groups did increase the number of seats held, their gains were not the huge wave that some predicted and the near term impact on the euro should be minimal. 
  • Following the results, Greece has announced a snap election where the incumbent PM is likely to lose.  The results also put pressure on the coalition governments in Italy and Germany.  In Italy, a strong showing for Lega gives more credibility to their push for more power.  In Germany, a poor showing from one of the coalition government’s members put into question the viability of its relationship with Angela Merkel’s conservatives.   
  • In the UK, the two main political parties—the ruling Conservative Party and the main opposition Labour Party—suffered losses.  The main beneficiaries were the pro-Brexit and anti-Brexit parties, illustrating how divided the country is over the issue of Brexit.  So far, 9 candidates have officially launched campaigns to succeed PM May with Boris Johnson holding a shrinking lead. 
  • Eurozone consumer confidence came in at -6.5, meeting expectations.  German consumer confidence came in at 10.1 versus expectations for a 10.4 print.
  • US 10-year yields dropped to 2.27%, marking a new cycle low.  Notably, the 3-month/10-year curve has inverted more than it did back in March. 
If we can help you with any Foreign Exchange needs, please email 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
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
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. City National 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 Please do not reply to this email. To ensure the delivery of future emails, please add 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.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?