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.”
February 6, 2020
EUR/USD 1.0996 GBP/USD 1.2961 USD/CAD 1.3289 AUD/USD 0.6749 USD/JPY 109.9000 USD/CNH 6.9671 USD/ILS 3.4299 USD/MXN 18.6140 USD/CHF 0.9750 USD/INR 71.1975
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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