As it is known, U.S. President Donald Trump restated his attention to place big tariffs on imports of steel and aluminum, warning the European Union of the impact of ‘big tax’ for not treating the United States well in terms of trade. On his comment, the International Monetary Funds’ Managing Director, Christine Lagarde, said on Wednesday that nobody wins in a trade war and that the macro-economic impact of the U.S tariffs on imports would be serious if other countries respond with tariffs of their own. The countries that would be most affected are Canada, Europe and Germany in particular.
Furthermore, Lagarde added that she hopes that Trump will not proceed with imposing the tariff threat and added “we recommend an agreement between the different parties, and talks, talks”.
With regards to Brexit, the EU has released yesterday their draft negotiating guidelines for the post-Brexit trade agreement. These guidelines will guide chief EU negotiator Michel Bernier when he sits down to discuss a trade agreement with the UK later this year. Following this event, Chancellor Philip Hammond gave a speech that outlined the UK’s goals for a financial services relationship with the EU. May has rejected passporting rules last week, therefore yesterday’s speech had an aim to stress the regulatory alignment between the two blocks.
Yesterday the focus was on the US and Canada, with the ADP Non-Farm Employment Change and Canada Trade Balance, as well as the BOC Rate Statement.
The US private sector employment increased by 235,000 jobs from January to February, on a seasonally adjusted basis, revealed the latest ADP National Employment Report released yesterday. The labor market continues to experience uninterrupted growth,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “We see persistent gains across most industries with leisure and hospitality and retail leading the way as consumer spending kicked up. At this pace of job growth employers will soon become hard-pressed to find qualified workers.
The Bank of Canada maintained its target for the overnight rate at 1 1/4 per cent at the March 2018 policy meeting. The Bank Rate is correspondingly 1 1/2 per cent and the deposit rate is 1 per cent. Some of the accompanying monetary policy statements referred to the importance of trade developments and growing source of uncertainty; higher rates are likely warranted over time, but some continued policy accommodation will likely be needed to keep economy close to potential inflation on target; gain in imports reflected a stronger business investment, which ads to economies capacity, and global growth is seen as solid and broad-based.
The big highlight on Thursday will be the ECB meeting at 12.45pm GMT, followed by President Draghi’s press conference. In terms of data, China’s trade stats for February will most likely warrant the closest attention, while January factory orders in Germany and the latest weekly initial jobless claims reading in the US are also due. -FXStreet
EUR/USD
The EUR’s move above the double top neckline of 1.2201 on Mar. 1 trapped bears on the wrong side of the market. In the subsequent days, the common currency extended gains and rose to a high of 1.2446 (yesterday) as fears of trade war saw investors ditch the greenback in favor of the currency backed by hefty current account surplus.
The pair remained within the familiar range today despite the US ADP report showed the US private sector added 235K jobs during February, more than the 195K initially estimated albeit lower than January’s 244K (revised from 234K).
The softer tone around the greenback continues to drive the sentiment in the global markets today, all amidst a pick-up in the risk-off trade following the resignation of Trump’s economic adviser, Gary Cohn. –FXStreet
GBP/USD
GBP/USD is moving sideways ahead of the European market session, testing into highs at 1.3910. The Sterling is grinding upwards in early Thursday trading, trying to eat away at the drop-off that occurred in the first half of Wednesday. The British Pound remains pressured as Brexit clouds loom. The most recent development is a new EU draft document that outlines trade in services.
The draft states that the UK will be treated as a third country and will not be given a special treatment. British financial firms may operate in the continent, but only under the rules of the country that hosts them. Financial services is a sensitive issue for Britain as it is a booming sector that has a trade surplus with Europe, the only such sector to enjoy such a surplus.
The UK wanted a better agreement but the EU sticks to its “no cherry picking” scenario.If agreed upon, such institutions will conduct business under two regulatory entities. Moreover, Goldman Sachs will be moving some staffers in London to Frankfurt, perhaps leading the way for others.
The primary theme in wider markets is Trump’s tariffs. The President is doubling down on his stance to fight a war trade which he endorses. Moreover, the chief economic advisor Gary Cohen has decided to resign, EU officials are also busy on that front, suggesting ways to retaliate to these tariffs by imposing counter-tariffs. The talk about a trade war is not helping the pound. –FXStreet
USD/JPY
USD/JPY is testing the boundaries once again in the Tokyo open after a series of data was released for Japan. Currently, USD/JPY is trading at 106.17, up 0.09% on the day, having posted a daily high at 106.22 and low at 106.02.
The pair caught some fresh bids after the latest ADP National Employment Report showed that the US private sector employers added 235K new jobs during the month of February. The headline figure, marking 200K+ jobs gains for the fifth month in a row, was better than 195K expected and provided a minor lift to the major.
Adding to this, a slight improvement in investors’ appetite for riskier assets, as depicted by a goodish rebound across European equity markets, was seen denting the Japanese Yen’s safe-haven assets and further collaborated to the pair’s ongoing rebound. –FXStreet
Gold
Gold is trading lower at 1324 down 0.78% on the day after jumping more than $5 on the news that Cohn, top Trump economic advisor resigned. The news was perceived quite bearish for the economy as a whole. –FXStreet
KEY ECONOMIC CALENDAR EVENTS FOR March 8th
AUD Trade Balance
CNY Trade Balance
EUR German Factory Orders (m/m)
EUR Minimum Bid Rate
EUR ECB Press Conference
CAD Building Permits (m/m)
CAD NHPI (m/m)
CAD BOC Gov. Poloz Speaks
CAD Gov. Council Member Lane Speaks
USD Unemployment Claims
