Morning Commentary: Signal in the Noise

Foreign Exchange - Morning Commentary
Signal in the Noise
Share this story:
Andrew Kositkun
Andrew Kositkun
Foreign Exchange Head Trader
Politics surrounding the Democratic presidential nominee have generated a massive amount of headlines leading up to the primaries.  For the most part, markets have looked through these headlines as they were more focused on other geopolitical events.  This is set to change.    

The formal Democratic nomination selection process kicked off last night with the Iowa primary.  While an unexpected technological glitch has delayed the Iowa results, they should be announced later today.  In total, 39% of delegates should be chosen by Super Tuesday (March 3). 

Clearly the proximity of actual voting raises the importance of the Democratic race.  This focus has only been amplified by Bernie Sanders’ recent surge in the polls covering early primary states given the fiscal deficit impact of Sanders’ signature proposals.  On a broader level, elections matter as the Democratic nomination and the US presidential election will shape future US policy toward China, global trade, and US’ stance on multilateral institutions such as NATO, WTO, etc.

Ultimately, it is important to remember a couple of points.  The first is that Senate and House races, while less covered, are also important as legislative approval is needed for the signature proposals to become law.  The second point is that support remains fragmented overall, both between frontrunners and between moderates and progressive camps.  From an FX perspective, the race between the moderate and progressive camps will be the most important factor in determining the USD impact. 
  • President Trump will deliver his State of the Union address tonight at 6 pm PST.  It is expected that the president will address less contentious topics such as tax cuts and infrastructure spending. 
  • Coronavirus headlines continue to hit the newswires with the infection rate and death toll continuing to rise.  However, market indicators show that concern has started to recede with China adding liquidity to the markets for the second straight day.  For the day, equity markets are higher around the world and some companies have announced that they are resuming business operations in China.  Given this, risks to the global economy remain with the list of companies warning of the outbreak’s negative economic impact growing.     
  • The Reserve Bank of Australia kept its cash rate unchanged with the tone of the statement less dovish than in December as it represented a relatively optimistic view of the domestic and global economy.  While the bank noted that interest rates have “already been reduced to a very low level,” the door to easing remains open.   
  • Technical experts from OPEC are scheduled to meet in Vienna today in order to evaluate the impact from the coronavirus on oil demand.  Saudi Arabia has been pushing for a cut as oil demand in China has dropped 20%. 
  • UK construction PMI beat estimates at 48.4 versus expectations for a 47.1 print.  While the data did bounce today, there remains softness in the economy and markets continue to expect a BoE cut this year.
If we can help you with any Foreign Exchange needs, please email 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 Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2020 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.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?