Morning Commentary: Politics Roil the Markets

Foreign Exchange - Morning Commentary

Politics Roil the Markets

Share this story:
Facebook
Twitter
LinkedIn
Email
Alan Rose
Alan Rose
Foreign Exchange Senior Trader
We spend a lot of time analyzing economic data and central bank monetary policy as they generally provide the backbone to determine the direction of the global economy and exchange rates. But, we also spend a lot of time analyzing geopolitical and political developments in general and the impact that they also have on the global economy. We regularly remind our readers that political developments can impact and overwhelm the markets in the short term. It would appear this week will be one where politics is at the forefront.
 
As we arrive this morning, there are numerous flashpoints that are negatively impacting the markets and hurting investor confidence and expectations:
 
  • U.S. – China trade talks are at the top of that list with the threat that the U.S. will impose more tariffs on Friday but with the hope that Chinese Vice Premier Liu will arrive in the U.S. and work to find a compromise.
 
  • Turkey’s stock market, bond market, and currency are all under severe pressure this morning as Turkey’s President Erdogan is set to rerun the mayoral elections that his party lost to the opposition. Turkey is an economic mess with inflation four times the official target, UR at 14.75%, and the country in a recession.
 
  • Finally, Brexit is back on the agenda with PM May meeting with the Labor party to try to find a way forward for the stalemate that seems to never end. Both the Tory Party and Labor took heavy elections losses last week as the electorate is dissatisfied with a lack of results after nearly three years. A failure to compromise could result in a snap election, another referendum, or PM May facing another leadership challenge.
 
While Asian equity markets were mixed overnight after collapsing the day before, European and U.S. equity markets are lower. G7 interest rates, for the most part, are lower and commodity prices are weaker. The U.S. dollar (DXY) is stronger against most of the major and emerging market currencies (Turkey is weaker by nearly 1%).
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • Australia is one of the few currencies in positive territory this morning. The Reserve Bank of Australia (RBA) kept interest rates unchanged at 1.50%...the market was evenly divided between a hold and a cut in interest rates. The RBA’s statement focused on an improving labor market and implied that low inflation readings were transitory. Aussie interest rates are up sharply on the day and have helped to pull the Aussie higher.
  • Malaysia cut interest rates by 25 bps to 3.00%. The market was again evenly divided between a hold and a cut.
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