Morning Commentary: Adding More Wood to the Fire

Foreign Exchange - Morning Commentary

Adding More Wood to the Fire

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Alan Rose
Alan Rose
Foreign Exchange Head Trader
Markets remain volatile and chaotic even as we wind down toward a holiday week. The Fed’s tone deafness and disdain for the markets in Wednesday’s FOMC announcement and press conference have caused U.S and global equities to continue to falter. Investors are becoming increasingly concerned about a global slowdown and weaker growth and earnings as we head into 2019 combined now with a Fed error. The DJI and S & P indexes are having their worst December since 1931!
 
Overlaid on top of all this uncertainty for the future is more chaos emanating from Washington. Markets are still reeling from the FOMC announcement and now must contend with a potential government shutdown, a withdrawal of U.S. troops from Syria, and the resignation of Defense Secretary Mattis. Politics and the markets can be a very combustible mix.
 
This morning when I awoke and checked the markets, I was shocked to see the U.S. dollar (DXY) actually stronger after yesterday’s rout. Despite all the negatives that I have just discussed, apparently investors still see U.S. Treasuries as a favored safe haven in these stressful times. How long the U.S. will remain a safe haven when the source of the uncertainty and risk is the U.S. itself remains to be seen. We remain concerned about the U.S. dollar and advocate for importers to be more aggressive in buying currencies.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • U.S. Durable Goods Orders for November came in below consensus rising by 0.8% against expectations of a gain of 1.6%. October’s Durable Goods orders fell by 4.3%; this series is particularly volatile related to aircraft orders. Final U.S. Q3 GDP came in slightly weaker at 3.4% after the initial print of 3.5%.
  • Canadian GDP for October rose by 0.3% which is the fastest pace in five months on a boost from manufacturing. The Canadian dollar is weaker on the back of a stronger dollar and weaker commodity prices.
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