A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
The Carrot or the Stick?
Share this story:
Alan Rose Foreign Exchange Senior Trader
The Trump administration has primarily used the stick against both allies and adversaries to obtain desired results regarding trade concessions to improve the massive U.S. trade deficit and level the playing field. While much of what the Trump administration is focusing on is to protect intellectual property rights and level the playing field regarding tariffs, in the background, the clock is running and time is getting shorter to achieve desired results.
The 2020 Presidential election will begin to get geared up on both political sides and the Trump administration wants a strong economy and a strong stock market heading into the campaign season. With the current government shutdown starting to bite into the economy and other signs of a slowing U.S. economy, the Trump administration needs to change the market dynamics, conclude a trade deal with China and the EZ, and get the U.S. and global economy back on track.
Late yesterday, the Wall Street Journal carried a story that Treasury Secretary Mnuchin was in favor of rolling back some of the sanctions against China to help current trade talks succeed. The Treasury department denied the story, but markets believe that this is just another piece of evidence pointing to a compromise. The hard-liners have been in charge regarding trade, but given the current political environment with Republicans and the Trump administration bearing more responsibility for the government shutdown, perhaps the carrot is winning out over the stick as a means to move the trade talks along.
Many market participants are skeptical of a shift in stance by the White House and expect that trade talks could get worse before they get better. There has been no sign that the hard-liners regarding trade are out of favor. In the short term, markets want to believe that the White House is looking to make a favorable trade deal; overnight, global equity markets responded positively to the headlines despite the denial and are a sea of green with China and German equity markets up nearly 2.00%. Time will tell as we are only a tweet away from confirming or denying a shift in tactics by the White House.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
U.K. Retail Sales for December came in weaker than forecast at -0.9% but had little impact on the British pound (GBP). The GBP is consolidating its gains as short positions get covered on the near term optimism that a soft Brexit will finally be negotiated and there will not be a hard landing for the U.K. economy. The GBP is up nearly 2% in the past month.
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:
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.
Now accepting scholarship apps Celebrating 40 years of service -- A loan to an innovative company -- Affording your dream home -- Mergers and a new branch in Raleigh View this email in your browser Forward to a friend
Here's what this indicator is saying about US stocks right now. ACTIVE INVESTOR WEEKLY EDITION: January 21, 2022 View in a browser FIDELITY VIEWPOINTS ® WEEKLY EDITION: January 21, 2022 Bollinger band stock signal Here's what this indicator is saying about US stocks right now. Read more CHART OF THE WEEK Inflation and corporate consolidation US industries have become