Morning Commentary: Beware the Law of Unintended Consequences

Foreign Exchange - Morning Commentary

Beware the Law of Unintended Consequences

Share this story:
Facebook
Twitter
LinkedIn
Email
Alan Rose
Alan Rose
Foreign Exchange Senior Trader
There is an eerie calm in the markets this morning after the U.S. raised tariffs on $200 billion of Chinese imported goods to 25% at midnight last night in the hope of extracting trade concessions from China. Yesterday, markets were hopeful that the mere threat of using more tariffs was just a bargaining ploy to cause China to acquiesce to U.S. demands. Market optimism surrounding a near term successful conclusion to these trade talks is slowly beginning to fade, but they remain hopeful.
 
Asian equities began in the red but Chinese state authorities bolstered their market near the end of the session to finish in positive territory, and many other Asian equities finished in positive territory setting a constructive tone for Europe. U.S. equities are scheduled to open lower. G7 interest rates are nearly unchanged with the exception of Canada, commodities prices are flat lining, and the U.S. dollar (DXY) is weaker against most of the major and emerging market currencies.
 
On March 2, 2018, President Trump said “Trade wars are good and easy to win.” That does not appear to be the case any longer as China digs in and does not appear to bend to the will of the U.S demands. The law of unintended consequences could come into play here as China will no doubt retaliate, and U.S. manufacturers and farmers will bear the brunt of the White House’s strategy which could result in a slower U.S. economy, weaker U.S. equity prices, and political dissatisfaction with President Trump and the White House. Hope springs eternal; trade talks will continue again today.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • Canada is one of the top performing currencies today on the back of a spectacular April jobs report. Market expectations were for job gains near 11,000 but April posted the largest job gains in Canadian labor history of 106,500. The UR dropped from 5.8% to 5.7% and the labor force participation rate rose from 65.7 to 65.9. Canadian interest rates are higher and has helped to pull the Canadian dollar higher.
  • U.S. CPI rose in April by less than forecast at 0.3% and the YoY rate rose from 1.9% to 2.0%. Ex-food and energy, CPI rose just by 0.1% in April, but the YoY rate rose from 2.0% to 2.1%. U.S. interest rates are nearly unchanged on the session.
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
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
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. City National 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

Viewpoints: What to do after a data breach