Morning Commentary: Damage Control

Foreign Exchange - Morning Commentary

Damage Control

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Alan Rose
Alan Rose
Foreign Exchange Head Trader
U.S. equity and bond markets are closed today to honor former President George H.W. Bush, but the foreign exchange markets are open.
 
A respite is welcome after a tumultuous day yesterday where U.S. equities and interest rates collapsed partly due to continued anxieties over U.S. – China trade undermined by vague and inconsistent comments from the White House and the President. Overnight, the Chinese attempted damage control to prevent another free-fall in the markets by stating that the recent meeting was “very successful” and promised to quickly implement items of agreement with the U.S. to meet the scheduled timeline.
 
Actions speak louder than words for the markets right now - conflicting statements from the White House yesterday and vague commitments from China did little to help confidence and stabilize the markets. Asian and European equities are all in the red today as markets remain preoccupied with Fed policy, a flattening yield curve and interest rate inversion, and concerns about future U.S. and global growth are sending investors to the sidelines.
 
Volatility is here to stay in the short term. There is too much uncertainty now with headwinds and political uncertainty coming from multiple directions. The U.S. dollar so far has weathered much of the turmoil in equities and interest rates but is at risk. Importers of currencies should continue to be proactive about managing their portfolios.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • Aussie Q3 GDP came in weaker than expected at 0.3% against expectations of a gain of 0.6%. YoY GDP fell from 3.4% to 2.8%.
  • India kept interest rates unchanged at 6.50% as expected.
  • Toronto housing sales disappointed again and saw the biggest decline since March, falling by 3.4%. The average price of a home in Toronto is $575,200.00.
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