Wall Street opened with a thud. The Dow Jones Industrial Average, S&P 500 and Nasdaq gave back over half of yesterday’s gains by 14:00 GMT, as traders took direction from European and Asia price actions and the bond market. US 10-year Treasury yields are a few ticks higher than yesterday’s low, but the rally lacks conviction. Bond traders appear to believe that Fed chair Jerome Powell turned dovish and are downgrading their 2019 rate hike forecasts. Hopes that Powell would clarify his thoughts in Congressional testimony on Wednesday were dashed when his testimony was cancelled.
Wednesday was declared a Day of Mourning to honour the late George H.W. Bush. All US government offices and Wall Street are closed.
Markets are also confused by the Trump/Xi dinner results. The White House press release about the dinner vastly differs from the statement from Beijing. Washington’s version has specific details, while China’s statement is vague. China doesn’t mention anything about reducing tariffs on US cars although Trump tweeted that tariffs would be removed.
The US dollar opened with losses against the G10 major currencies. Those gains have been eased somewhat in a nervous market. The economic data calendar is empty, which isn’t helping. USDCAD managed to scrape higher supported by renewed WTI oil selling pressure. The Canadian dollar is more sensitive to oil price moves lately, because of the Province of Alberta’s decision to cut production by 8.7% or 325,000 barrels/day. It is not an attempt to support Opec but rather a way of addressing rising inventory issues due to a lack of delivery capacity.
GBPUSD retreated from its New York opening level with prices dropping from 1.2819 to 1.2748, which is just above the overnight low of 1.2721. Traders appear to have re-evaluated the benefits to GBPUSD from the EU court opinion that the UK could unilaterally revoke Article 50. To many, that news just adds to the confusion ahead of the House of Commons vote on December 11.