Morning Commentary: Light at the End of the Tunnel?

A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.

Light at the End of the Tunnel? Share this story: Alan Rose Foreign Exchange Senior Trader

Yesterday, things seemed pretty bleak regarding the prospects of a near term conclusion to Phase 1 of the U.S. - China trade deal. The U.S. Senate passed unanimous legislation in favor of the pro-democracy movement in Hong Kong, and the White House, late in the day, indicated that a signing of the Phase 1 document might not even occur this year. Markets, by and large, had a negative reaction, but equities were only lower by nearly 0.5% and interest rates fell only a few basis points. Today, there appears to be some light at the end of the tunnel regarding prospects for Phase 1. China’s chief trade negotiator, Vice Premier Liu He, indicated that he was “cautiously optimistic” about reaching a deal but gave no further specifics or a time table. This headline is important as it follows earlier statements from the White House that President Trump will sign reconciled legislation from the House and Senate to support the Hong Kong protest movement in their fight for democracy which would seem to complicate matters regarding the trade talks. Markets have been so whipsawed over the past weeks and months by both positive and negative headlines regarding the trade talks, that despite the more upbeat news, market reaction is subdued and muted. European equities are fractionally in the red and U.S. equities are scheduled to open nearly unchanged. G7 interest rates are fractionally higher and the U.S. dollar is mixed with commodity and energy-linked currencies outperforming. From the cheap seats where I sit, it would appear that both China and the U.S. need a win-win and that even a slimmed down Phase 1 document is a step in the right direction. HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT: The South African Reserve bank surprised many in the market by keeping interest rates unchanged at 6.50% sending the South African rand soaring by nearly 1% before correcting lower. Many in the market were calling for a 25 bps reduction as both growth and inflation have been moderating. U.S. jobless claims came in higher than expected at 227,000 which is the highest level since June 22. The data suggests some softening in the labor market.  Job growth this year has averaged 167,000 per month compared to 223,000 in 2018 as the trade war has slowed economic growth over the past 18 months.

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:

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 NMLSR ID# 536994 | City National Bank Member FDIC