Forex news for North American trade on May 31, 2018
- US will impose tariffs on EU, Canada and Mexico at midnight tonight
- Conte gets mandate to form government. Announcement expected Friday
- US April core PCE +0.2% vs +0.1% expected
- US April pending home sales -1.3% vs +0.4% m/m expected
- May Chicago PMI 62.7 vs 58.3 expected
- Canada Q1 GDP q/q annualized 1.3% vs +1.8% expected
- Fed's Quarles says his near-term economic outlook hasn't changed
- Trudeau says US steel and aluminum tariffs are totally unacceptable. Will retaliate
- Fed's Brainard supports gradual hikes, say rates may rise above neutral
- Canada trade minister Champagne: "Very disappointed" by metals tariffs
- BOC's Leduc: Wages rising at close to what we would expect
- Italy: Giovanni Tria to be named economy minister in new gov't proposal
- Weekly US oil inventories -3620K vs +450K expected
Markets:
- Gold down $2 to $2706
- WTI crude down $1.18 to $67.03
- S&P 500 down 19 points to 2705
- US 10-yaer yields flat at 2.85%
- CHF leads, CAD lags
The US announced tariffs against the EU, Canada and Mexico that will go into effect in a few hours. The response from all three was to launch countervailing measures, with Canada first to outline its exact, dollar-for-dollar response.
The broader market was relatively sanguine at first then turned as Canada outlined steel, aluminum and other tariffs. That led to some modest risk aversion and sent stock markets to the lows of the day.
Overall, markets took the news better than I would have expected. That might be a reflection of month-end flows rather than fundamentals. USD/JPY dipped down to 108.39 but rebounded to 108.85 at the day's end, not far off the 109.00 European high.
USD/CAD also didn't shirk too much on the tariffs but had earlier surged on weak GDP numbers. The pair was trading around 1.2850 at the start of Toronto's day and finished at 1.2955, erasing almost all of the BOC-inspired drop a day earlier.
Cable sank below 1.3300 and shopped above 1.3275 but not finishing much off the lows.
The euro didn't get much relief from the naming of a new finance minister. Tria will be confirmed and a new government will take over early Friday. At the end of the day, there were no moves the market was going to like in regards to Italy but for the moment, this adds more stability than a snap election. Meanwhile, it's increasingly clear that Spain's Rajoy will be shown the door on Friday.
EUR/USD first climbed on Tria but then gave it back as it chopped in the 1.1700-1.1650 range before finish near the top of the range.
