| | | Prolonged U.S.-China Trade Talks Make Us Re-Think Trade | | U.S.-China trade talks reopened last week in Shanghai for the first time since June. After negotiations stalled, President Trump suddenly tweeted his intention to slap another 10 percent tariff on $300 billion in Chinese goods. Chinese officials announced that they will halt purchases of U.S. agricultural products, while the People's Bank of China set the Chinese yuan close to 2 percent weaker, allowing it to trade below 7.00 (meaning one U.S. dollar now buys more than 7 yuan) for the first time in a decade. As a result, the U.S. Treasury dubbed China a currency manipulator. | | As tensions escalated, so did risk aversion. Global stocks took a big hit and bond yields quickly declined, in sync with the conventional market reaction to "risk-off," where investors' appetite for risk wanes. In a reflection of the confusion, however, some investors actually felt more comfortable putting their money into less conventional asset classes such as precious metal (gold and silver) and even cryptocurrencies, as if those were safer! | | Central banks elsewhere were also quick to respond with immediate and unconventional rate cuts. On Wednesday, the Reserve Bank of New Zealand cut its key rate by 50 basis points instead of 25 basis points, resulting in the New Zealand dollar tumbling more than 1 percent in one day. The same day, the Reserve Bank of India also made an unconventional rate cut of 35 basis points, larger than the 25 expected, stating that a smaller cut was insufficient. And the Bank of Thailand also surprised the market with an unexpected cut of 25 basis points, the first in four years. Pressure is expected to mount on the U.S. Federal Reserve, too, though Chair Jerome Powell has expressed willingness to be flexible on rate cuts. | | Watch the video | | 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: | | | | | | 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. | | | | | | |
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