Morning Commentary: The Calm Before the Storm

Foreign Exchange - Morning Commentary
The Calm Before the Storm
Share this story:
Facebook
Twitter
LinkedIn
Email
Alan Rose
Alan Rose
Foreign Exchange Senior Trader
Markets are attempting to digest an enormous amount of information today but net-on-net, equities, interest rates, and the U.S. dollar were largely where we left them last night with a few minor exceptions until a Trump tweet a short while ago. The mega events that are still undetermined are the outcome of the U.K. election today and whether the White House will proceed or delay additional tariffs on China scheduled for this Sunday.  President Trump just tweeted that we are very close to a Phase 1 deal and has provided a boost to equities and interest rates despite the disappointing U.S. economic data (see below).

Yesterday, the FOMC at its 11:00 PST announcement left rates unchanged and the communication that followed regarding the economy and future course of monetary policy met expectations and barely moved the needle for the markets. But at 11:30, when Fed Chairman Powell presided over the regular press conference, he proved once again that he has been unable to master Fed speak in answering questions from the press and, with his dovish comments about inflation, set off a chain reaction of lower interest rates and a much weaker U.S. dollar. Markets are still digesting the impact of Chairman Powell’s statements.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • The ECB left interest rates unchanged at 0.0%, as was expected, and new ECB President Christine Lagarde’s press conference covered all the bases. Downside risks remain but have become “less pronounced”. She said she is neither a hawk nor a dove but wants to be an owl which is an animal that represents wisdom. All in all, EZ interest rates are near unchanged as is the euro.
  • Turkey cut interest rates by 200 bps today from 14% to 12%... 50 more bps than expected. Rates started this year at 24% but under President Erdogan’s constant pressure, a new head of the central bank, a weakening economy and declining inflation, rates have fallen dramatically since the summer. Fortunately, the Turkish lira has remained stable during this dramatic fall in interest rates.
  • The Swiss National Bank kept interest rates steady at -0.75% as was expected. It was a dovish hold as the central bank cut its inflation forecasts for 2020 and 2021. The Swiss franc is near unchanged.
  • Brazil cut interest rates by 50 bps to 4.50% as expected. The central bank left the door open to further rate cuts and the Brazilian real has continued its appreciation over the past two weeks as have many other Latin American currencies.
  • U.S. PPI came in below expectations at 0.0% against consensus of a gain of 0.2%. Ex-food and energy also came in at 0.0%, which was also below expectations. PPI YoY remains at 1.1% and ex-food and energy fell from 1.6% to 1.3%. Jobless claims spiked to 2-year highs of 252,000 from 203,000 but seasonal factors played a part in the large increase.
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