Morning Commentary: Dysfunction Junction

Foreign Exchange - Morning Commentary

Dysfunction Junction

Share this story:
Facebook
Twitter
LinkedIn
Email
Andrew Kositkun
Andrew Kositkun
Foreign Exchange Head Trader
A risk off tone has been the general characteristic of markets to kick off this week.  This poor sentiment has been driven by much weaker than expected economic data out of China and the EU. 
 
In Europe, industrial production data also came in worse than expected and was compounded by a downward revision of the prior print.  The most recent disappointing data print reaffirms concerns for downside risk for Q4 GDP as uncertainty remains in global trade and headwinds from China, Italy, France and Brexit. 
 
In China, imports dropped 7.6%, the worst reading in nearly 10 years, and implied a softening in the domestic economy.  Additionally, exports fell 4.4% as headwinds from the continuing trade war continues to weigh on demand.  Markets are now watching the end of January when Chinese Vice Premier Lui He, China's top trade aide, is set to visit the US and continue trade talks.  It has been reported that Lui will meet with Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin with the latter indicting that the government shut down won't interfere with this meeting. 
 
In the US, the partial government shutdown is now in Day 24, making this shutdown the longest one in history.  It has been reported that some key Republican senators up for reelection in 2020 have called for the government shutdown to end. 
 
Market consensus has been that government shutdowns don't impact the markets or the greater economy.  However, previous shutdowns have all been shorter and we are now in unchartered territory.  As this current shutdown drags on, the greater the negative impact should be as consumer confidence takes a hit.  Lastly, the implications for the impending debt ceiling debate later this year cannot be overlooked.  With political gridlock at an elevated level, the possibility for a fiscal mistake has been raised.  
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • This week brings another healthy dose of Fed speak with 6 different Fed officials scheduled to speak.  Recent comments from the Fed have taken on a dovish tone, with an emphasis on data dependency and a reiteration that the Fed is not on a preset path. Markets will be keen to hear a similar message again this week.
  • After much back and forth, including a delay in December, the UK Parliament is set to vote on PM May's withdrawal agreement tomorrow.  While the EU has sent in a letter assuring that the backstop, if triggered, is just a temporary measure, not much has changed since the vote delay in December, leading the markets to expect a government defeat and focus on the margin of defeat with media reporting the government could lose by over 100 votes.    
  • Current tensions between the US and Turkey were raised on a Trump tweet stating that the US would “devastate Turkey economically” if they were to attack the Kurds in Northern Syria.
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 ©2019 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