In a press release yesterday, White House economic advisor Peter Navarro asked investors to be patient regarding the trade negotiations. He said “in order to achieve a great result, we need to let the process take its course”. Equity and Treasury markets had positive reactions to this and the USD was mostly higher against all currencies.
The ECB is expected to add stimulus to the market in the form of a rate cut tomorrow. The expected 10 basis point cut will take the deposit rate from -0.4% to -0.5%. Many also expect the central bank to announce they are restarting their quantitative easing program beginning in October. Analysts are mixed in their prediction for the EUR following the meeting. Some believe the announcement will fall short of expectations and that it could be EUR positive. German 2019 economic growth forecast released showed a downgrade and this was disappointing to traders.
Overnight trading was quiet as fears of a no-deal Brexit seem to be easing. UK employment numbers were better than expected, as unemployment moved from 3.9% to 3.8%. Average weekly earnings also were better than market expectations, rising 4.0% in July, the highest level since the 2008 financial crisis. Parliament remains suspended until October 14.
Japan’s PM Abe reshuffled his cabinet yesterday and afterwards was on the newswire saying he will not allow the Japanese economy to become a drag on the global economy. The G7 in its last meeting agreed to take action if downside risks to the global economy materialize. Traders continue to exit JPY safe haven trades as optimism over US-China trade talks continue.
The upward momentum in the Canadian Dollar continued yesterday as the bullish run on oil prices continued, underpinning demand for commodity based currencies. Oil prices moved above the $58 level, the highest in six weeks. This move was the result of renewed hopes that OPEC and its allies will agree to extend an agreement to reduce oil output. Stronger than expected housing data showed building permits rose by 3% in July after a June number of -3.1%. This also helped boost the CAD.
China announced it will exempt a number of US imports from the 25% tariffs imposed last year. These exemptions cover a range of 16 categories ranging from fish food to pesticides and are set to begin next week, lasting until Sept. 16, 2020. The American Chamber of Commerce in Shanghai warned yesterday that “revenue growth projections for US companies in China have been lowered for 2019 and 2020 due to the ongoing trade dispute between the US and China.