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US Open Preview – Dollar bears in charge; European equities tumble as trade fears persist
March 23, 2018 12:26 pmVideo
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Here are the latest developments in global markets:
Day ahead: Trade developments in the spotlight; Canadian inflation pending
Looking ahead in the day, investors will continue to look for any updates on the trade front as Trump’s signature on new import tariffs against China on Thursday and China’s response on Friday to levy its own tariffs on US products increased speculation that the trade story is not likely to end anytime soon despite exemptions being made on several allies including the EU, Australia, and South Korea. A 30-day consultation period will follow once the list of products being targeted are published, while a 60-day deadline has been given to the Treasury Department to form restrictions aimed to prevent Chinese companies to acquire US tech-sensitive firms. Meanwhile, the US Trade Representative, Robert Lighthizer, had warned on Thursday that any retaliation from China could bring new actions by the US. Therefore, it would be interesting to see what the US reaction to China’s threats would be. In case the US uses a tougher language, exasperating the trade turmoil, stock and FX markets could experience further downside pressures.
Developments in the White House would also be in focus after the replacement of the US National Security adviser, Herbert Mcmaster with the former ambassador to the UN in the Bush administration and a hawk on foreign policies, John Bolton, raised concerns over the US’s relations with Iran and North Korea. Note that McMaster had previously backed the choice of using military forces against North Korea.
In terms of data releases, the calendar will feature US and Canadian figures later in the day. At 1230 GMT, traders will keep a close eye on Canadian consumer prices and retail sales. The headline inflation is expected to have risen by 2.0% year-on-year in February compared to 1.7% seen in the previous month, bringing some good news to BoC policymakers who are hoping for the measure to reach the midpoint of their 1-3.0% target. Growth in retail sales is also anticipated to have improved in January, with the gauge said to have surged by 1.1% month-on-month after a fall of 0.8% in December. If the data appear better-than-expected, the loonie could extend gains as this could signal further rate hikes by the BoC.
Regarding the US data, US durable goods orders, published at the same time, are likely to have strengthened in February as well. Particularly, analysts believe that new orders for long-lasting manufacturing products have rebounded by 1.5% m/m after tumbling by 3.6% in January. A few hours later, new home sales due at 1400 GMT could show an increase of 0.623 million units from a rise of 0.593 million in the preceding month.
In energy markets, Baker Hughes will report on the number of active US oil rig count.
Turning to today’s public appearances, Atlanta Fed President Raphael Bostic (voter) will deliver remarks at 1210 GMT, while 20 minutes later at 1230 GMT, we will hear from BoE MPC member Gertjan Vlieghe. Then at 1430 GMT, Minneapolis Fed President Neel Kashkari (non-voter) will step up to the rostrum, followed by Dallas Fed President Robert Kaplan (non-voter) at 1530 GMT.
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