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Dollar Falls As Trade War Fears Rise, Bank Of Canada Decision Eyed – Action Forex

Dollar Falls As Trade War Fears Rise, Bank Of Canada Decision Eyed – Action Forex

Release Date:  Friday, March 9, 2018

Dollar Falls As Trade War Fears Rise, Bank Of Canada Decision Eyed – Action Forex
Action Forex reports the latest developments in global markets.

“FOREX: The dollar was recording losses versus a basket of currencies, falling to its lowest in two weeks, as fears over as potential trade war were rekindled following the resignation of US President Trump’s top economic advisor, a free trade proponent.

“STOCKS: US markets managed to close higher yesterday, with the Nasdaq Composite gaining 0.6%, the S&P 500 climbing 0.3%, and the Dow Jones rising, though only marginally so. However, a few hours after US markets closed, news hit the wires that Trump’s chief economic advisor Gary Cohn would resign, reviving concerns that a trade war may be looming and sending US equity futures sharply into negative territory. As expected, risk aversion rolled into Asia, with major benchmarks being a sea of red. Japan’s Nikkei 225 and Topix fell by 0.8% and 0.7% respectively, while in Hong Kong, the Hang Seng was down by 1.0%. Europe seems ready to follow suit, with futures tracking all the major indices currently flashing red, pointing to a lower open.

“COMMODITIES: Oil prices fell sharply, with WTI and Brent crude trading 0.8% and 0.9% lower respectively, as investors’ risk aversion and the API inventory data weighed on the precious liquid. The private API figures showed a larger-than-expected build in crude stockpiles, which likely generated speculation that the official EIA inventory data later today (1530 GMT) are likely to show similar results. In precious metals, gold prices fell 0.1% on Wednesday, with the yellow metal being unable to sustain the gains it posted on the news that Gary Cohn resigned. It is currently trading near the $1332/ounce mark, and in case trade concerns intensify further, then the safe-haven could extend its gains and head for a test of the $1340 resistance zone.

“The main event in the FX market today will probably be the Bank of Canada (BoC) rate decision at 1500 GMT. Attention will also fall on the release of the US ADP employment report, as well as any potential updates on the trade front, in light of Gary Cohn’s resignation and the resurging probability of a tit-for-tat trade war.

“In the US, the ADP employment report for February is due out at 1315 GMT and expectations are for the private sector to have added 195k jobs in the month. If confirmed, such a print could enhance speculation that the NFP number on Friday may also meet its forecast of 200k and thereby, help the dollar to recover some of its latest losses. The US trade balance for January is also set for release at 1330 GMT, alongside the final estimate of labor costs for Q4 2017.

“Equity markets will likely continue to be driven by speculation regarding the likelihood of a trade war actually materializing. Even though US Treasury Secretary Steven Mnuchin said yesterday that the US is ‘not looking to get into trade wars’, the resignation of Gary Cohn and President Trump’s unyielding stance on the imposition of tariffs are keeping that risk very much alive. Markets are still uncertain as to whether these are simply unorthodox negotiating tactics in complex trade talks, or whether the President is indeed set to toughen up on trade, perhaps to appeal to his voting base ahead of the midterm US elections. Until there is more clarity on the subject, price action in equities may remain choppy, and especially sensitive to headlines.” (“Dollar Falls As Trade War Fears Rise, Bank Of Canada Decision Eyed.” Action Forex 03.7.18)

‘It Could Be A Deep Correction’ – J.P. Morgan Co-President Warns Of 40$ Stock Pullback - MarketWatch
J.P. Morgan Co-President, Daniel Pinot, warns that the market is set for as much as a 40% plunge in the next two to three year. “we know there will be a correction at some point.” A correction is usually defined by a more than 10% drop from a recent market peak.

“A 40% plunge would erase the recent gains for U.S. stocks. The S&P 500 SPX, +45% has rallied 38% over the past two years, while the Dow Jones Industrial DJIA, +38% has soared 45% in that period.  
Pinto’s prediction comes as traders already are nervous over the potential fallout from President Donald Trump’s planned tariffs on steel and aluminum imports.

“’We are at an interesting time. We are 2-3 years probably until the end of the cycle and markets are going to be nervous. Nervous to anything that relates to inflation, nervous to anything that relates to growth. And I think the tariffs — if they go a lot beyond what has been announced — it is something that will concern the markets about future growth,’ Pinto said in the Bloomberg interview.

“J.P. Morgan isn’t the only investment house that has issued correction warnings lately. Fellow Wall Street bank Goldman Sachs GS, +0.37%  said a spike in 10-year U.S. Treasury yields TMUBMUSD10Y, -0.95%  could cause a 20% to 25% drop in stock prices by the end of the year, while Scott Minerd, global chief investment officer at Guggenheim Partners, warned that the current market mood is similar to 1987, when the market crashed.” (“’It could be a deep correction’ – J.P. Morgan co-president warns of 40% stock pullback.” MarketWatch 03.08.18)