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China’s tariff cut fuels equity gains, dollar unchanged

China’s plan to cut tariffs on US imports fueled higher global equities. The dollar is basically unchanged and bond yields are slightly lower. Optimism is growing that the global economy will weather the coronavirus with less impact than initially projected. At the same time, oil edged higher after OPEC said they may cut output amid lower demand due to the virus. US data released this morning was mixed.

“In a gentle way, you can shake the world.” 

Mahatma Gandhi, Indian lawyer, anti-colonial nationalist and political ethicist
  • FX Rates
    February 6, 2020

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.


  • USD

    Effective February 14, China plans to cut tariffs 50% on $75 billion of US imports, as a reciprocating action and part of an interim trade deal. The dollar is little changed overnight, only a 0.35% gain against the UK pound stands out. This morning’s Non-farm Productivity for Q4 was lower than expected and Initial Jobless Claims for the week ending Feb-1 were also lower.

    GBP

    The UK pound is suffering from trader concerns with Brexit. EU/UK trade negotiations have not yet started, and comments from various players on both sides have been adversarial. The pound is trading near the lower end of the two-month trading range.

    EUR

    The euro is trading in a narrow range around $1.10. In a speech by ECB President Christine Lagarde to European Parliament, she acknowledged that there are few options available for more monetary stimulus, implying that interest rates may go no lower and that fiscal spending is required. German factory orders for December were well below expectations.

    CAD

    Very little movement in the Canadian dollar was seen despite higher oil prices and higher equity prices. The USD/CAD continues to trade slightly below 1.33, as traders look forward to tomorrow’s Canadian employment data.

    ASIA/PACIFIC

    The Chinese yuan held steady overnight, as the PBOC awaits the market reaction to their tariff cuts on US imports. Even as virus infections exceed 28,000, new case numbers seem to be stabilizing. China provided billions of dollars into money markets earlier in the week to restore calm.

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For more analysis on FX markets or information regarding SVB's FX services:

Contact your respective SVB FX Advisor or the SVB FX Advisory Team at fxadvisors@svb.com.
See all of SVB's latest FX information and commentary at www.svb.com/foreign-exchange

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About the Author

Scott Petruska is Chief Currency Strategist and senior advisor for Silicon Valley Bank’s global financial services group, and is based in Boston, MA. He advises clients on currency and interest rate hedging strategies, and helps them with other aspects of global banking. He regularly writes blogs on topics covering the global financial markets, conducts client seminars and webinars, and speaks at regional financial conferences.

Petruska has more than 30 years experience in the currency and interest rate markets, and has lived and worked in Boston, Chicago, New York City, Singapore and Tokyo. Prior to joining SVB in 2009, he worked at several large international financial institutions, including National Westminster Bank, Irving Trust, Bank of New York, State Street Bank and Commerce Bank. He has been an institutional trader, product developer, analyst, salesperson and advisor.

Petruska has been awarded several professional designations, including the CFA (Chartered Financial Analyst), FRM (Financial Risk Manager) and CMT (Certified Market Technician). He earned his undergraduate degree in Finance & Banking from the University of Wisconsin.

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