- Chancellor Hammond insist on EU deal to include the financial services
- Bank of Canada rate decision this afternoon
By Zafer Deniz
All of the major currencies traded higher against the US Dollar yesterday except for the Japanese Yen and Swiss Franc. Dollar Yen in particular reacted to every trade/tariff headline and equity market fluctuation. There was some excitement when officials from South Korea said that North Korea is willing to denuclearize if regime safety is guaranteed and President Trump responded by confirming progress in possible North Korea talks. There was ongoing concerns about US tariffs and trade. Tensions are still high, China has not responded, so watch this space. However stocks recovered when Senator Perdue, who is an ally of Trump, said he is open to changing the tariffs. These conflicting headlines aren't helpful and is adding to the market anxiety. With the EU repeating their threats of retaliatory sanctions investors continue to believe that trade tensions will intensify before they improve leaving the risk for the US Dollar to downside. In addition, Trump’s top economic adviser Gary Cohn is resigning. There has been speculation that Mr Cohn, a supporter of free trade, was angered by Mr Trump's plans to impose tariffs on aluminium and steel imports.
Some Brexit News; Philip Hammond gets his chance at last to set out his vision for Brexit today. Mr Hammond will say that the EU needs the UK’s world-leading financial-services industry to stay strong after Brexit, and that a good deal on finance is in both sides’ interest. "Every trade deal that the EU has ever done has been unique,” according to Mr Hammond' extracts released by his office. He also stated, “So I am clear, not only that it is possible to include financial services within a trade deal but that it is very much in our mutual interest to do so.” But shortly before he stands up, EU President Donald Tusk will have set out the bloc’s negotiating position for talks on the future relationship and will probably make clear that finance is off the table. Again, watch this space as Sterling is incredibly sensitive to any Brexit headlines from policymakers.
The day is light on data other than the Canadian Interest Rate Decision. After raising interest rates by 25bp in January, the Bank of Canada (BoC) is widely expected to leave rates unchanged.
There will be no follow-up press conference so the earliest that we will hear from BoC officials will be on Thursday since the last monetary policy meeting. We've also seen the Canadian Dollar weaken amidst widespread deterioration in Canadian data. Retail sales turned negative, major job losses were reported, inflation slowed on an annual basis, housing activity weakened, the trade deficit ballooned and manufacturing activity in general slowed from the start of the year. Oil prices are also lower but most importantly, President Trump's tariffs and attack on NAFTA poses serious risks for Canada's economy. As the number one supplier of both steel and aluminium to the US, Canada is a huge victim of the tariffs.