Markets Respond to Trade Grenade; Payrolls Meet Expectations
AUGUST 02, 2019
The U.S. dollar is mixed this morning but is overall near yearly highs against a number of its rivals.
The greenback rallied aggressively following the Fed’s meeting on Wednesday but gave back some of those gains throughout yesterday session.
President Trump threw another trade grenade yesterday by announcing an additional 10% tariff on $300 billion worth of Chinese goods. Global equities, commodities and the greenback fell in the wake. The timing of the new tariffs is not surprising to some. The Federal Reserve fingered rising trade tensions as a reason for this week’s cut, so Trump is likely ratcheting up the pressure to force the Fed to continue cuts throughout the year. Indeed, Fed Futures markets showed this happening yesterday afternoon. Odds for additional 50bp worth of cuts this year rebounded late yesterday.
The economic docket showed that the U.S. labor market remains strong despite a slight miss. Non-Farm Payrolls rose 164K in July, right in line with expectations. But June’s print was downwardly revised from 224K to 193K. Still an impressive number.
A slew of additional data is slated for today including factory orders, durable good orders and the University of Michigan consumer sentiment.
What to Watch Today…
- Durable Goods, Factory Orders, and Michigan Consumer Sentiment
Complete Economic Calendar can be found here.
The Japanese yen has been the biggest beneficiary of the global market turmoil. The safe-haven rallied extensively yesterday and continued to push stronger overnight following President Trump’s escalation of the trade war and China’s promise to retaliate. The yen also found favor with investors as trade tensions between Japan and Korea intensified.
USD/JPY has fallen 1.7% this week and the yen is at its strongest level versus the greenback since June 25th.
The sterling took a breather from its terrible summer and traded mostly flat against the greenback. Still, the sterling is set to record its worst weekly drop since May. New Prime Minister Boris Johnson took his first political hit while in office as the anti-Brexit Liberal Democrats took a seat from Johnson’s Conservative party in an election in Wales. The Conservative’s parliamentary majority is now only one seat.