The US increased tariffs on Chinese goods today, markets showing a muted response
Scott Petruska, CFA | May 10, 2019
President Trump has followed through with his threat to increase tariffs from 10% to 25% on $200 billion of Chinese goods. China said it will be forced to retaliate, though they have not done so at this time. According to Trump, talks are continuing today in a “very congenial manner, there is absolutely no need to rush.” Currency markets are largely unchanged following the announcement, equities are lower. This morning’s release of US CPI, which rose less than expected, has put the dollar on its back foot.
“Success is going from failure to failure without loss of enthusiasm.”Winston Churchill
May 10, 2019
EUR/USD 1.1238 GBP/USD 1.3024 USD/CAD 1.3396 AUD/USD 0.7002 USD/JPY 109.66 USD/CNH 6.8237 USD/ILS 3.5613 USD/MXN 19.1444 USD/CHF 1.0120 USD/INR 69.9113
US CPI data released this morning rose less than expected in April, pushing the dollar slightly lower. The core CPI, which excludes food and energy, rose 0.1% from the prior month, lower than the expected 0.2%. The broader CPI rose 0.3% m/m and 2% y/y, both less than expected. The US Congressional Budget Office monthly budget statement is released today, which may provide attention-grabbing insight into government spending and receipts.GBP
The UK pound moved little overnight, still trading around the $1.30 level. A UK think tank, the National Institute of Economic and Social Research, estimates the UK economy will slow to 0.3% in Q2 from 0.5% in Q1, citing Brexit-related uncertainty, hindering forward planning by business and government.EURThe euro is higher following release of German export data, which unexpectedly rose to a new record high in March. The euro edged higher further after release of US CPI data.CAD
Canada’s job gains rose a record 106k in April, boosting the Canadian dollar by nearly 0.6% to 1.34 on the news. Also, their unemployment rate improved to 5.7% from 5.8% and their hourly wage rate rose 2.3%.ASIA/PACIFIC
The Chinese yuan remains weak as the trade war escalates. After an initial sell-off, the Chinese stock market rose today, as traders had factored in the tariff hike during this week.
The Japanese yen moved little overnight, but remains attractive as a safe haven. USD/JPY continues to trade under 110.
The Australian dollar is trading over $0.70 once again, despite pessimistic forecasts by the Reserve Bank in its quarterly policy statement released yesterday.
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