Morning Commentary: All Quiet on the Western Front

Foreign Exchange - Morning Commentary

All Quiet on the Western Front

Share this story:
Facebook
Twitter
LinkedIn
Email
Andrew Kositkun
Andrew Kositkun
Foreign Exchange Analyst
As we kick off a shortened holiday week, the currency markets, as expected, find themselves in quiet trading.  Adding to the typical holiday lull is the partial government shutdown that is now in its 3rd day.  For those curious, 25% of the government has shutdown.    
 
However, this quiet lull that is categorizing the markets today could very well turn out to be the calm before the storm as news flow over the weekend appears to show that Republicans and Democrats are no closer to a deal and this shutdown could extend into the new year.  If this standoff extends through December 28, it will then roll over to the new congress and a Democrat controlled House. 
 
Adding to the sense of uncertainty in Washington DC has been the abrupt resignation of Defense Secretary James Mattis and reports that President Trump discussed whether he could fire Fed Chairman Powell.  On this last point, the president has the ability to remove a Fed Chair for cause, however you would believe that this hurdle of cause is high and if Powell were to be removed, the markets would have a very strong negative reaction. 
 
In an effort to ease concerns, Treasury Secretary Mnuchin announced that he spoke with top executives at 6 large US banks and they all indicated there is "…ample liquidity for lending."  From all indications, Secretary Mnuchin was attempting to ease market concerns but very well did the exact opposite.  While the stock market has sold off sharply, there wasn't really any concerns about liquidity.  However, the markets are very much on edge, leaving some wondering if there is something Mnuchin knows that the markets don't, especially given that the easier way to check on liquidity would be to call Jay Powell.  On this last point, we would like to point out that this is a messaging issue, not a liquidity issue, as all signs point to more than adequate liquidity on top of continued strong economic data. 
 
While the US dollar has held up relatively well, we remain concerned over the USD as it remains vulnerable to a loss of confidence in US lawmakers.        
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • Top Chinese officials have announced plans for "significant" cuts to taxes and fees in 2019 and signaled expectations for easier monetary conditions.  For the history buffs out there, the language used was very similar to the language used in 2014 right before China cut its interest rates and bank reserve requirements.
  • The UK Parliament is on recess until January 7 meaning the markets should be in for a much needed break from Brexit news.
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
Investment and Insurance Products:
Are Not insured by the FDIC or any other federal government agency
Are Not deposits of or guaranteed by a Bank or any Bank Affiliate
May Lose Value
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. The 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 ©2018 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

Fidelity: Bollinger band stock signal