A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
Share this story:
Andrew Kositkun Foreign Exchange Head Trader
Ever since her election, Taiwan’s President Tsai Ing-wen has positioned herself as a defender of Taiwan’s democracy against China’s efforts to influence the island. This positioning turned her re-election efforts into a defacto referendum on China’s efforts to gain control of the island.
By winning ~8.2 million votes, the highest total ever collected by a presidential candidate since Taiwan started electing its president by a popular vote in 1996, President Tsai Ing-wen delivered a resounding rebuke of China’s actions. Tsai’s margin of victory of nearly 20% marked the completion of a massive turnaround. Roughly 6 months ago, Tsai trailed her leading challenger in the polls. By taking an aggressive stance in supporting Hong Kong residents protesting Beijing’s rule, Tsai was able to rally against her challenger who championed closer ties to China.
After her victory, Tsai reiterated her opposition to China’s “one country, two systems” framework that China currently uses in Hong Kong and hopes to apply to Taiwan. However, Tsai has maintained her willingness to engage in dialogue with China as long as China respects Taiwan’s sovereignty and democracy. For its part, China stated that it will hold talks with Taiwan as long as Taipei acknowledges that the two are part of “One China.” Clearly these two views are at odds with each other. Despite the resounding victory for Tsai, China’s massive economic and military influence still gives it clout in the region. As a result, Taiwan’s ambiguous status quo is unlikely to change anytime soon.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
The Chinese delegation arrived in Washington today with the Phase 1 trade deal expected to be signed this Wednesday. It is expected that the deal will address commitments from China to respect America IP, increase imports from America and to not manipulate exchange rates. Additionally, it is expected that the US and China will agree to hold semiannual talks to resolve disputes and push for economic reforms.
The Iranian government admitted to accidentally shooting down the Ukrainian bound passenger jet, leading to renewed domestic protests, flipping the narrative of support for the Iranian government after the killing of General Soleimani. With the Iranian regime forced to focus on domestic matters, the likelihood of a further escalation of conflict with the US is likely reduced.
The GBP is under pressure this session after comments from BoE member Gertjan Vlieghe indicating he would vote for interest rate cuts this month if there are not any signs of an improvement in the economy. These comments come after BoE Governor Carney’s comments that the bank has plenty of firepower.
UK economic data also disappointed with industrial production data coming in at -1.2% against expectations for a 0.0% print.
Mexico’s gross fixed investment number disappointed with a -8.6% print against expectations for a -8.0% print. Investment activity has been notably weak which does not bode well for Q4 GDP as well as for potential growth moving forward. However the MXN remains resilient due to its relatively high interest rate and positive market risk sentiment.
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.
Here's what this indicator is saying about US stocks right now. ACTIVE INVESTOR WEEKLY EDITION: January 21, 2022 View in a browser FIDELITY VIEWPOINTS ® WEEKLY EDITION: January 21, 2022 Bollinger band stock signal Here's what this indicator is saying about US stocks right now. Read more CHART OF THE WEEK Inflation and corporate consolidation US industries have become
Learn how to keep all your accounts—not just the ones at Fidelity—secure. November 18, 2021 View in a browser FIDELITY VIEWPOINTS ® WEEKLY EDITION: November 18, 2021 What to do after a data breach Learn how to keep all your accounts—not just the ones at Fidelity—secure. Read more What's ahead for your RMDs Make sure to take your required withdrawals this year, then start to plan ahead.