US-China trade talks weigh on financial markets, lift dollar
Scott Petruska, CFA | May 8, 2019
US-China trade talks resume on Thursday, but markets are nervous. The current “risk-off” mode is pushing global equity markets lower, bond yields lower, and the dollar higher. A statement this morning from the Iranian government threatened the 2015 nuclear deal.
“Trust the wait. Embrace the uncertainty. When nothing is certain, anything is possible.”Mandy Hale, The Single Woman
May 8, 2019
EUR/USD 1.1199 GBP/USD 1.3009 USD/CAD 1.3467 AUD/USD 0.7004 USD/JPY 110.08 USD/CNH 6.8006 USD/ILS 3.5751 USD/MXN 19.0919 USD/CHF 1.0187 USD/INR 69.7137
The dollar is benefiting from its role as a safe haven asset, as trading moves to “risk-off” mode. Markets are also unnerved by Iran’s statement today that it will scale back its pledges under the 2015 nuclear deal and may resume uranium enrichment unless the remaining signatories (Germany, Britain, France, China and Russia) ensure within 60 days that Iran may sell its oil overseas. The US sent an aircraft carrier to the Persian Gulf earlier in the week.GBP
The pound fell as expectations for a cross-party Brexit breakthrough diminished. PM May’s goal of reaching an agreement with the Labour Party declined after another day of inconclusive talks. The pound is trading near $1.30 after peaking at $1.3170 earlier in the week.EUR
It’s been a relatively uneventful week for the euro; it’s steady around the $1.12 level. European stocks dropped following steep declines in Asian markets amid trade tensions. German Industrial Production surprised on the upside, +0.5% actual vs. -0.5% expected.CAD
The Canadian dollar moved little overnight, remaining well under the key 1.35 level, and despite lower oil prices. Traders await Canada’s April Housing Starts, which are expected to fall by 6.8%.ASIA/PACIFIC
A sell-off in Asian equities put pressure on the Chinese yuan. China’s Shanghai Composite dropped 1.1% after an unexpected fall in exports and gain in imports, showing that US tariff pressures may be having a negative impact on trade.
Dollar-yen dropped below 110 for the first time in months, due to the yen’s role as a safe haven asset for global investors.
The New Zealand dollar fell after the Reserve Bank unexpectedly cut interest rates by 50 bps. The RBNZ expressed surprise by the negative impact on NZ by the global economic slowdown.
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