Morning Commentary: Keeping the Floodgates Open

Foreign Exchange - Morning Commentary
Keeping the Floodgates Open
Share this story:
Facebook
Twitter
LinkedIn
Email
David Atkinson
David Atkinson
Foreign Exchange Sales Manager
Historic carnage in global equity markets continues today.  European stock markets are down 7-8% after President Trump announced the imposition of a 30-day travel ban from Europe.  The red ink continues in the US with stocks down 7%, hitting the automatic stabilizers for the second time this week.

There has been some interesting chatter about the bond markets, with the 10-year Treasury seemingly able to keep going at steady rates the last few days, but reports out now point to severe strain in the liquidity of that system.  Earlier this week, the 10-year was around 81 basis points after recent lows of 31 basis points.  That said, the 10-year is down this morning, currently trading around 66 basis points as I write.

That general question of liquidity seems to have informed the European Central Bank.  The much-anticipated meeting today resulted in no change in their target rate of -0.50%.  The ECB did however focus on extra short-term liquidity to the markets in the form of repo operations – much like what the Fed has been doing for months and in fact increased those repo operations this week.

The no-change decision from the ECB was unexpected, and in my opinion, was a welcome breath of fresh air.  At this point in the negative interest rate cycle, what is an extra dozen basis points or so to a policy rate that seems to not be working anyway?  Interestingly, in the first few minutes after the announcement, we are seeing a lot of uncertainty in futures markets about what the ECB will do next.  The next scheduled ECB rate decision is April 30, and there is just a small chance currently of a cut at that meeting.

We have been writing about how data is almost meaningless these days, but it is interesting to note that initial jobless claims for last week came in lower than expected – 211K against expectations of 220K.  The Producer Price Index fell a bit more than expected for February – down -0.6% against expectations of a -0.1% decline.  Based on just those two limited data points, we can see a general deceleration of economic activity although that has not filtered into the job market yet.  We’ll see what happens next in that area.
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 ©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.
TERMS & CONDITIONS  |  PRIVACY STATEMENT
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC
                                                           

Comments

Popular posts from this blog

Are tax hikes coming?

Go long—for top rates