The China Syndrome
FX Trader, Loonieviews.net
The China Syndrome is the fictional term applied to nuclear reactor components, melting through the earth in the US and landing in China, according to Wikipedia. The China Syndrome can also be used to describe that nation’s response to American tariffs.
On Friday, President Trump complained that China and the European Union have been manipulating their currencies an interest rates lower. China, perhaps not wanting the American president to look foolish, injected liquidity into the banking system on Monday, via the medium-term lending facility. Today, they fixed the yuan at a one-year low against the US dollar. The US trade representative is holding public hearings today and tomorrow on its proposal for tariffs on $16.0 billion worth of Chinese goods.
The US dollar grudgingly weakened in Asia and Europe in response to the improved risk tone, but in New York, the G-10 major currencies were decidedly perkier. The greenback has added to its overnight losses led by a rally in AUDUSD. The Australian dollar may be getting an added boost from anticipation of a jump in inflation readings tomorrow morning but breaking above 0.7440 may be difficult. NZDUSD is tracking AUDUSD moves. USDCAD continues to be undermined by Friday’s robust domestic data. It is getting added support from a rebound in oil prices.
USDJPY rejected gains above 111.20 and is hovering around the 111.00 area. Traders are torn between rising US Treasury yields and risk aversion from China/US trade tensions.
EURUSD bounced between 1.1690 and 1.1720 in New York trading. EURUSD demand because of improved risk sentiment from the equity market rally is being offset by concerns that the European Central Bank will reaffirm its dovish outlook on Thursday.
Wall Street opened with a bang. The NASDAQ is at a record high after rising 0.92% to 7,913.91 this morning. The DJIA and S&P 500 are up 0.57% and 0.67% respectively. Traders are looking for strong earnings reports today from Harley Davidson this morning and AT&T after the close.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.