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Dark Time Ahead for Trump? Loonie Gaining Strength

Published April 10, 2018
  • The DXY set a one-month high of 90.597 ahead of the US nonfarm payrolls report data on Friday but later lost some steam, weighed down by concerns about the US-China trade dispute and disappointing US jobs data.
  • US equity futures surged today as comments from China’s president eased investor jitters over a potential trade war between the world’s two largest economies. Xi Jinping promised to further open up the Chinese economy to foreign investments while continuing with financial reforms. Xi pledged greater openness in the financial and automobile sectors, a message that was well received by investors who had feared a rise in tensions between Washington and Beijing.
  • Donald Trump’s lawyer’s offices were raided late in the day yesterday by the FBI, possibly seeking information on potential ties concerning Russia’s involvement in the 2016 electoral campaign. The FBI raid against Michael Cohen spiked President Trump’s rampant indignation over the Robert Mueller probe to previously unseen heights, multiplying the persecution complex he feels about the FBI and his own justice department and fueling his sense that he’s the target of a witch hunt.
  • ECB’s Ewald Nowotny released comments this morning suggesting that the ECB would go for a 20 basis point hike instead of the 10 basis points expected. A key market narrative recently has been that weak growth could negatively impact the ECB’s reaction function and rate path (which would be bearish for the euro), but today’s ECB speak has not provided confirmation of this.
  • Today’s economic calendar is highlighted by top-tier US inflation data. While market analysts expected producer prices to inch up 0.1%, they in fact rose 0.3%, strengthening from February’s 0.2% increase. Consumer inflation data will be released tomorrow. Rising inflation would be a catalyst to push the Federal Reserve toward raising interest rates at a faster pace than currently expected.
  • The rally in crude oil prices and remarks by Mexican Secretary of the Economy, Ildefonso Guajardo, that he saw an 80% chance of an agreement being reached on NAFTA by the start of May go some way towards explaining today’s rise in the strength of the loonie. USD/CAD is down nearly half a cent to the low 1.26’s at the time of writing.