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Trade War Between China and US Nags; All Eyes on NAFTA

Published April 9, 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.
  • The EUR was broadly stable despite the two latest survey points that added to the latest bunch of lackluster headlines from the euro zone. German exports plunged unexpectedly in February, posting their largest monthly drop in more than three years, while a survey showed that investor morale in the euro zone deteriorated for the third month in April. Overall, long euro positions are broadly unchanged and are holding near record highs, though this week might see a change in positions with the ECB minutes of its last policy meeting due on Thursday.
  • The loonie has consolidated its strength of late as markets begin to price in a conclusion to the NAFTA negotiations. Donald Trump has set this coming Thursday as a personal deadline to conclude NAFTA talks with Mexico and Canada. Many points are still under discussion, despite recent developments. Canada appears to be well positioned to negotiate, given the importance for President Trump to shore up his alliances in the context of the standoff between himself and China as well as the mid-term congressional elections in the US in November.
  • Oil markets stabilized today after slumping nearly 2% on Friday, due to concerns over the intensifying trade dispute between China and the US as well as increased US drilling activity. Markets today were also eyeing the situation in Syria after reports – denied by the Pentagon – that US forces had struck a major air base there. Both Brent crude and WTI crude are up nearly 1.5% percent on the day, currently trading at $67.75 and $62.80/barrel respectively, at time of writing.
  • Today, we are keeping an eye on the BoC’s Business Outlook Survey for the first quarter of 2018 which will be released at 10:30am EST. Other important economic events out of Canada this week include key housing data, with Housing Starts and Building Permits tomorrow and Existing Home Sales and the MLS Home Price Index on Friday.
  • It’s a light calendar for US data this week. Wednesday brings CPI inflation data and the March FOMC meeting minutes. Washington will likely be a source of angst for the markets again this week as the rhetoric heats up between the US and China on trade issues.