Morning Commentary: Beware of a Rush to Judgement

Foreign Exchange - Morning Commentary
Beware of a Rush to Judgement
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Andrew Kositkun
Andrew Kositkun
Foreign Exchange Head Trader
The big headline out last Friday was China’s cancellation of a planned visit to US farms which the markets took as a negative turning US-China trade discussions.   As it turns out, the US requested that China cancel its visit.  The U.S. Trade Representative’s office didn’t find out about the meeting until after it was scheduled and requested the goodwill visit be cancelled for domestic reasons but has called the talks “productive” with the Chinese describing them as “constructive.”

As it stands, both sides are targeting high level talks at the beginning of October setting a much different tone to trade talk progress than what the markets had last Friday.  However, history has conditioned the markets to expect sharp swings in sentiment between scheduled talks and there is no reason to believe that there will be a change in this trend. 

Relatively positive trade news aside, the global economy continues to sputter with poor economic data continuing out of Europe.  This time it is factory data out of Germany has contracted by the fastest pace in the last decade.  At a higher level, manufacturing activity for the euro area as a whole has shrunk for the eight month. 

Europe has faced a litany of economic issues ranging from global trade tensions to a looming Brexit threat.  With no near term resolution expected for these issues and details the most recent PMI report signaling further downside, the ECB’s most recent stimulus package, rolled out less than two weeks ago, could already turn out to be insufficient.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • Oil prices are off their session highs as Saudi Arabia has reiterated comments that oil production could be back up by the end of the month. 
  • U.K.’s Supreme Court is set to rule on whether Johnson acted lawfully when he suspended Parliament.  A ruling is expected by Tuesday with a possibility for a ruling no earlier than this afternoon.  While it’s possible the prorogation could be overturned, the key legislation parliament wanted to pass is already law.
  • World leaders will assemble for the 74th UN General Assembly in New York.  US/Iran tensions, climate change, and global trade will be some of the key issues discussed.  President Donald Trump is scheduled to address the assembly on Tuesday morning. 
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