Morning Commentary: Whipsaw City

Foreign Exchange - Morning Commentary
Whipsaw City
Share this story:
Facebook
Twitter
LinkedIn
Email
Alan Rose
Alan Rose
Foreign Exchange Senior Trader
Beginning with yesterday’s FOMC meeting and dealing with headlines this morning that China is doubting if a long-term trade deal is possible with President Trump, markets and investors have been whipped around by the price action over the past 24 hours. As we arrive this morning, markets are in “risk-off” mode with global equities faltering, G7 interest rates moving lower again, commodity and energy prices weakening, and safe haven currencies and gold on the rise.

Beginning with yesterday’s FOMC meeting and press conference, markets experienced a bloodbath in terms of price action that has continued overnight. Initially, the FOMC headlines at 11:00 combined with Chairman Powell’s early responses to the Q & A left the impression that yesterday’s rate cut would be the last for a while and the Fed would be “assessing” the impact of the most recent rate cuts. Interest rates rose and the U.S. dollar strengthened. But shortly after that, Powell reversed course and said that holding rates at their current levels would be appropriate as long as the outlook and inflation stayed within the Fed’s expectations. Markets did a complete 180 degree turn; rates fell and the U.S. dollar sank.

Chinese data and comments regarding a trade deal added another dose of volatility to the markets. Chinese Manufacturing PMI for October came in well below consensus at 49.3 against expectations of a 49.8 print. Even non-manufacturing disappointed falling below consensus estimates of 53.6 to 52.8. The headlines that followed later in the session concerning the prospects for a trade deal with President Trump added to full “risk-off” sentiment.

With the impeachment process heading into a new phase today and the U.S. jobs data tomorrow morning, markets will remain anxious and on edge. Continue to expect the unexpected, and importers and exporters should remain tactical given all the uncertainty in the markets.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • The Bank of Japan left interest rates unchanged at -0.1% while emphasizing that it is prepared to cut further if necessary. They also stated that they expect interest rates “to remain at their present or lower levels as long as it is necessary.” They also lowered their future growth and inflation forecasts. Japanese interest rates are lower, but the Japanese yen is the strongest major currency today on the back of “risk-off” sentiment.
  • Hong Kong reported very weak Q3 GDP data. Market expectations were expecting a mild contraction of 0.6% q/q and 0.3% y/y, but instead, GBP collapsed by 3.2% q/q and 2.9% y/y. The protests and trade war continue to hammer the economy with little relief in sight.
  • U.S. Personal Income and Spending for September came in near expectations with increases of 0.3% and 0.2% respectively. The key core PCE inflationary index came in at expectations of 1.7% which is slightly lower from the 1.8% last month. U.S. interest rates are down on the session and lower for the third day in a row.
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:
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 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
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC
                                                           

Comments

Popular posts from this blog

Fidelity: Bollinger band stock signal