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US Open Preview – Major currencies gain ground as trade fears recede; European equities move higher
March 26, 2018 12:26 pmVideo
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Here are the latest developments in global markets:
Day ahead: Trade risks loom in the background
After a noisy week with a trade warn drama that spurred risk-off activities again into the markets, Monday is expected to be relatively quiet with few economic releases. However, the spotlight will remain on trade developments and investors will be eager to hear how the trade story will wrap up from here on following Trump’s decision on Thursday to implement new import tariffs on China and exclude a number of allies from the mental tariffs. Topics on monetary policy will also be in focus as several central bankers prepare to deliver speeches later today.
In the UK, a speech by the Bank of England Chief Economist Andy Haldane held in Scotland will be in focus for any clues that could signal that the central bank is ready to proceed with further monetary tightening at its next policy meeting in May. Note that last week, policymakers decided to leave interest rates unchanged but an unexpected split in the voting structure, with Ian McCafferty and Michael Saunders, calling for a rate hike, spurred speculation that borrowing costs could increase in May for the second time since the financial crisis. If Haldane holds a hawkish tone today, signaling that the next move in rates is up, then the pound could pick up speed.
In the US, business surveys conducted by the Chicago and the Dallas Fed will be released at 1330 GMT and 1530 GMT respectively, but the measures are less likely to move the dollar. Instead, comments by Fed voting members later today, including New York Fed President William Dudley (1630 GMT), Cleveland Fed President Loretta Mester (2030 GMT) and Fed Board Governor Randal Quarles (2310 GMT), could be of greater importance to the currency.
Still, any moves in the markets could be limited by the risk-off sentiment heightened last week after Trump put his warnings against China on the table, signing new import tariffs against the world’s largest exporter which stretched into other product areas other than steel and aluminum. China threatened to retaliate accordingly last week, but today China’s foreign minister said that the country is willing to start negotiations with the US to dissolve their trade differences, hinting that a trade war between them could be averted. Earlier, the US agreed to revise a free-trade agreement with South Korea (KORUS) which Trump called a “horrible deal” back in April. Particularly, Seoul said today that US automakers will have a better access to the economy, while South Korean steelmakers will avoid import tariffs but face quotas in the US market. While these developments seem to provide some relief to the markets and hopes that the US and China could end up to a less painful agreement for the moment, it remains to see whether Trump is willing to adjust his attitude in a positive way.
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