NY Open: Truce and consequences

Truth or Consequences was an American radio/TV games show that ran from 1940 to 1988. Truce or consequences is the result of the President Trump and President Jinping dinner in Argentina. The two leaders agreed to a trade war truce for 90 days while negotiators renew trade discussions. If no progress is made, there will be consequences.

Equity traders reacted as if “truce” meant “deal.” Wall Street followed Asia and European bourses higher led by a 442-point jump in the Dow Jones Industrial Average which touched 25,980.21, at the open. (DJIA) Prices have eased a tad but the DJIA is still up 1.15% as of 14:00 GMT. A rebound in crude oil prices helped sentiment.

NY FX traders do not seem to be as enamoured with the trade truce as their colleagues in Asia and Europe. The US dollar is only minimally softer since against the G-10 majors since the open. That may be because Americans are used to President Trump’s hyperbole and prefer to see some concrete evidence that the truce will last. Traders ignored this morning’s US data. ISM Manufacturing rise to 59.3 in November, beating the 57.5 forecast but Construction Spending was a tad worse than expected. 

WTI rallied 8.7% from Friday’s close to its $53.82/b peak but are currently trading at $52.77/b. The gap between Friday’s $50.66/b close and the $52.02/b open in Asia should act as a magnet for prices.

USDCAD sank alongside rallies in AUDUSD and NZDUSD following the trade war truce news. Prices suffered additional selling pressure because of the surge in oil prices. Trendline support in the 1.3160-70 area was tested and it held (so far). Traders are also looking ahead to Wednesday. The risk that the Bank of Canada issues a dovish policy statement increased with Friday’s weaker than expected Canada September GDP result.