Macro economics

Analytics on 10/06/2019. Markets rise on trade relief, dollar recovers

Trump announced that proposed tariffs on Mexican imports would be suspended indefinitely, which boosted risk sentiment and allowed for some gains in Europe. Nevertheless, investors remain cautious as the US President tweeted today that if Mexico doesn’t stick to the deal, then tariffs will be reinstated. As for China, U.S. Treasury Secretary Steven Mnuchin, said on Sunday that Trump will decide whether to implement more tariffs on China after meeting with Chinese President XI Jinping later in June. Elsewhere, G-20 finance leaders said yesterday that trade and geopolitical tensions have intensified, raising risks to improving global growth. At the same time, they stopped short of calling for a resolution of the deepening U.S.-China trade conflict.

Against this backdrop, the UK’s FTSE 100 adds 0.57 per cent to 7373, Italy’s FTSE MIB rises by 0.26 per cent to 20,413, France’s CAC 40 is up 0.22 percent to 5,376, while German DAX 30 adds 0.77 per cent to 12,045. US stock index futures point to gains after Trump said he would not impose 5% tariffs on Mexican exports, after Mexico agreed to strengthen immigration enforcement.

The greenback switched into a recovery mode after a broad-based sell-off on Friday as traders have already digested dismal jobs data from the US. The economy created only 75 thousand jobs, down from 263 thousand a month earlier. Wage growth was unchanged at 0.2%, shy of the estimate of 0.3%. Nevertheless, traders continue to price in a Fed rate hike this year, which caps the upside potential in the US currency. As such, EURUSD dipped on Monday after a two-day rally but still clings to the 1.13 figure. Amid lack of economic data from euro zone and the US, the pair’s short-term direction will likely depend on sentiment surrounding the dollar. After a dovish tone from the Federal Reserve, the bearish potential in the pair is limited. In the immediate term, EURUSD could remain in a consolidation mode until fresh drivers emerge later.

Crude oil prices struggle for direction on Monday. Brent attracted demand towards the end of last week and refreshed local highs around the $63.80 area earlier in the day but failed to extend the recovery as traders still express concerns over the global demand. However, these concerns could abate soon if the trade tensions between the US and their trading partners continue to ease. For Brent to stage a sustainable rally, however, investors need to see a substantial progress in the trade relations between the US and China. Technically, the futures need to hold above the $63 handle in the short term, with the initial bullish target comes around $64. On the downside, the barrel could lose the $62.20 region again should risk sentiment turns negative.

Nathan Lambert, Head of Global FX Analytical Department

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Interest rates

Country Rate Value
USA Federal Funds 0,25 %
Switzerland 3 Month LIBOR Range -0.75 %
United Kingdom Repo Rate 0,10 %
EU Refinancing Tender 0,00 %
Japan Overnight Call Rate -0,10 %
New Zealand Official Cash Rate 0,25 %
Australia Cash Rate 0,25 %
Canada Overnight Rate Target 0,25 %
All rates
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