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FX Update

Soft economic data and yield curve inversion tempers delay in trade tariffs


Weak economic data out of China and other countries drove the yield curve in the US and UK to invert in a classic signal of future negative economic growth. Hopes of a pause in the US-China trade war dampened as Trump's delayed implementation on new tariffs gets factored as temporary rather than a signal of softening tensions.

“Everything flows, and nothing abides, everything gives way, and nothing stays fixed."
  • FX Rates
    August 14, 2019

    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

    The dollar held onto yesterday’s gains vs. many currencies. The rally yesterday came after President Trump announced that some of the 10% tariffs on Chinese imports that were due to be implemented in September will now be delayed until after December 15.
    Import and export prices for July released this morning showed some inflation month-over-month but the core year-over-year numbers show deflation.


    Both consumer and producer prices in July came in higher/better than expected, helping the pound rally vs. the US dollar. The yield on the 10-year gilt traded below the yield on the 2-year signaling a recession in coming quarters is possible.


    The euro is flat this morning after German GDP data for the second quarter came in slightly better than forecasted.  Italian politics came off the boil as Matteo Salvini’s election plans suffered an early defeat as the opposition and the Five Star Movement united to reject an immediate vote of no confidence on Tuesday. The yield on the 10-year German bund fell to a negative 0.64%.


    The Canadian dollar followed oil prices lower. Weaker global data along with the inversion of the yield curve dampened expectations for the demand for oil.


    Chinese industrial output slowed more than expected and a weak forecast for retail sales confirmed faltering demand as a result of trade pressures from the US. Protests in Hong Kong turn violent leading to uncertainty around the economic impact of continued social unrest.
    The yield on the Japanese 10-year government bond fell to negative 0.22% and will likely fall below the 2016 low of -0.29.
    The Aussie dollar touched fresh 10-year lows vs. the US dollar on global trade concerns.

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About the Author

Peter Compton is a senior foreign exchange advisor for Silicon Valley Bank’s global financial services group, and has been with SVB since 2007. He helps clients design and implement hedging strategies for foreign currency exposures. Compton has over 20 years experience in global financial markets.

Before joining Silicon Valley Bank, Compton spent seven years working in the European equity markets. Based in Germany, he spent four years with HSBC and three years as Head of Equity Sales for ABN-AMRO in Frankfurt. Prior to his work overseas, Compton spent seven years with Bank of America in San Francisco as an equity and fixed income derivative specialist.

Compton holds a bachelor's degree in business and management from the University of Rhode Island and a Master's of Business Administration from San Francisco State University.
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