The Morning Commentary: “The Law of the Jungle”

Foreign Exchange - Morning Commentary
“The Law of the Jungle”
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Alan Rose
Alan Rose
Foreign Exchange Head Trader
Uncertainty and volatility will be the two key words to characterize the nature of the markets in the short term. Geopolitics, trade tensions, Fed policy, U.S. and global equity performance, U.S. November elections, etc. will continue to provide angst and anxiety for those that are involved in the markets.
 
Chinese President Xi made a highly anticipated speech in Shanghai and markets were hopeful that President Xi would be taking a more conciliatory tone toward the upcoming meeting with President Trump and future U.S. – China trade talks. It was not to be as he strongly denounced the “law of the jungle” and “beggar-thy-neighbor” trade practices directed at the U.S. and failed to announce any new major policy initiatives. Asian markets reacted poorly with almost all Asian equities down sharply with a ripple effects for related currencies and interest rates.
 
Even with the imposition of new Iranian sanctions announced by the U.S. this morning, equity markets have found some equilibrium and have stabilized. European equities have bounced off of their lows and U.S. equities have opened mixed following a wild and wooly week. U.S. and G7 interest rates are broadly unchanged.
 
Heading into the key midterm elections tomorrow, followed by the Fed meeting on Wednesday, we would not expect any outsized moves today or tomorrow as many investors and traders are sticking to the sidelines for now. Tuesday evening and Wednesday morning could provide a lot more fireworks if the expected November election results go awry.
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