Morning Commentary: Caught Between and a Rock and a Hard Place
Get link
Facebook
Twitter
Pinterest
Email
Other Apps
A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
Caught Between and a Rock and a Hard Place
Share this story:
Alan Rose Foreign Exchange Senior Trader
As we arrive this morning, President Trump has just ordered the Treasury to increase the sanctions on Iran. For the time being, the use of sanctions rather than military retaliation is causing oil prices to retreat for the second day in a row chopping in half the spike we saw in oil prices on Monday. Global equities are sideways and G7 and U.S. interest rates are down for third day in a row. The U.S. dollar is mixed to slightly stronger against the majors and emerging market currencies. Markets are on hold until the FOMC announcement at 11:00 PST followed by the press conference at 11:30.
The Fed finds itself in a very difficult position internally and externally. There were two dissenting votes at the last FOMC meeting where the Fed chose to cut rates and there could be more dissenting votes today as the market is near 100% committed to another 25 bp cut as part of another mid-course correction. From the outside, economists are also divided as to the need for another 25 bp cut as there have been numerous signs (U.S. Housing Starts today) that the consumer is doing very well and keeping the U.S. economy very resilient to outside pressures. Even recent inflation data has been on the rise adding to the woes for the Fed’s decision making process.
While short term expectations have been buoyed by the U.S. and China meeting in the coming weeks to find a breakthrough in the trade war, many market participants and economists do not see a comprehensive breakthrough on tariffs and the trade war dragging on into next year. A trade war that continues to drag on and bite into the U.S. and global economy is keeping recessionary warning signals flashing orange for next year.
Fears about the future state of the U.S. and global economy are keeping the pressure on the Fed and other central banks to remain vigilant about keeping monetary policy accommodative. This is keeping market probabilities of more Fed rate cuts alive later this year and next. Fed Chairman Powell will need all his skills and a bit of magic to thread the needle later today and appease all factions, critics, and market expectations.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
U.S. Housing Starts and building permits were dynamite numbers widely beating expectations. U.S. Housing Starts surged to a 12-year high in August. Multi-family starts soared by 32.8% while single-family starts rose by 4.4%. Permits grew by 13.3%. 30-year fixed rate mortgage interest rates have dropped by near 130 bps since late last year spurring demand. Mortgage applications to purchase a home increased 6% last week and were up by 15% annually. U.S. interest rates had little reaction to the news and are still lower on the session.
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.
Tune in for a guide to ETFs and investing strategies for potential long-term success. View in a browser Fidelity Fidelity Log in Creating a portfolio with ETFs: Why and how Creating a portfolio with ETFs: Why and how
View this email in your browser Want to watch a recording of yesterday's Simply Successful Investing Webinar. Just click here and use passcode 5q59Z&3M.
Exclusive webinar: The market, my portfolio, and options. Exclusive webinar: The market, my portfolio, and options. View in a browser Fidelity Fidelity Log in The market, my portfolio, and options The market, my portfolio, and options
Comments
Post a Comment