The U.S. Dollar is trading in mostly steady ranges, withstanding the short-term crisis of Gary Cohn’s resignations as top economic advisor to the White House and fears over a “trade war.”
Shares of equity markets across the globe recovered and the greenback faced little movement as the “buy-the-dip” flow continues in these ongoing times of high asset valuation.
The calm before the storm may be now as news of “very serious” trade counter-measures from China are rumored to be ready to put into action if the U.S. officially imposes the 25% tariff on steel and 10.0% on aluminum. Traders will await any White House statements as the order on the costs has been expected to be signed today, but some reports say the administration wants to take more days and conduct a full legal review.
As far as economic data, the labor sector remains strong with today’s Jobless Claims showing that less people are utilizing the benefits as they become employed. This is a follow-up to yesterday’s affirmation from the ADP Employment Report that jobs are growing as 250K payrolls were added over an estimated 200K.
The Euro is currently in a mostly quiet mode as the European Central Bank’s meeting is assessed by market participants. ECB head Mario Draghi is holding a press conference after expressing confidence in the economy and believes the Euro-zone will have stronger growth in 2018 than previously expected.
Additionally, the committee agreed to remove language on their decision that quantitative easing would be incremented by the committee as needed, meaning that they no longer see a need for increasing QE and will follow through with September plans to fully end the purchases.
One important note to take from Draghi’s statements is that he does see the tariffs and any other barriers to trade as a threat to GDP expansion and said they represented “downside risks.” Also, he mentioned issues it would create in FX fluctuations as nations not only could initiate their own tariffs, but also act to cheapen their local currency. Euro has been swinging within a 40-point range with the mixed tone of comments.
The “loonie” has fallen by almost 3.0% thus far this year after an accumulation of underwhelming economic indicators, fears over the possible death of NAFTA, and other possible trade issues. Steel exports to the U.S. are a major part of the commercial activity between the two countries and the potential new conflicts over tariffs are negatively affecting any hope for Canadian Dollar appreciation in the near-term.
A rally could be sparked if there is a major reversal in current U.S. policy, which has a chance of happening as headlines overnight featured statements from Director of Trade and Industrial Policy Peter Navarro regarding how Canada would be exempt from these new added costs to metals.