Forex news for NY trading on March 23, 2018
A snapshot of other markets at the week’s close shows:
- Spot gold of $18.71 or 1.4% at $1347.76
- WTI crude oil futures are trading up a dollar 63 or 2.54% at $65.83
- Bitcoin traded most of the day between its 200 hour moving average at $8398 and it’s 100 hour moving average at $8705. It is currently trading at $8594 up about $3.
In the US debt market, yields are down at the front end on a flight into safety after the stock markets decline:
- two-year 2.254%, -2.4 basis points
- 5 year 2.601%, -2.2 basis points
- 10 year 2.8117%, -1.2 basis points
- 30 year 3.062% unchanged on the day
You can’t start the review of the day without talking about the global stock markets.
Looking at the numbers:
- The Japanese Nikkei fell -4.51%
- The Shanghai composite index fell -3.39%
- The German DAX fell -1.77%
- The French CAC felt -1.39%
- The UK FTSE fell -0.44%
And then there was the US, where for the 2nd day in a row, stock markets tumbled:
- The S&P index fell -2.10%
- The NASDAQ composite index fell -2.43%
- The Dow industrial average fell -1.77%
For the week, here are some of the numbers:
- Japan Nikkei -5.44%
- German DAX -4.06%
- France’s CAC -3.55%
- UK’s FTSE -3.38%
- NASDAQ composite -6.54%
- S&P index -5.95%.
There was a global run out of equities and the market heads into the weekend scared.
- It started with Facebook data breach which took -14% off the price of that stock this week. It wasn’t like credit card data, social security numbers, or bank accounts were stolen (just the political bias of the most extremist on either side), but there is something great about blaming the platform and sending the whole market down with the ship (i.e. Facebook). Cambridge Analytica, who were the ones who really stole the data, lied about deleting it, and were proven to be the biggest “bad actors”, seemed to get more of a free pass. Go figure.
- The Fed tightened by 0.25%. That was largely expected. The Fed still saw 3 hikes in 2018 but raised 2019 to 3 from 2 tighenings. They also increased growth, and inflaiton expectations a bit and lowered employment projections – signs of a healthy economy with modest inflation.
- There was a lot of rumblings about LIBOR rates going higher which raises the funding costs for the banks. What they don’t tell you is lots of loans are priced off LIBOR as wel, so their rates go higher too. What is not really known is are banks in trouble? Libor costs tend to rise when banks can’t source liquidity. It seems like apart from Deutsche Bank which still struggles with pre and post 2008 problems, most of the other big names are not in trouble. Plus they still benefit from lower corporate tax rates. Anyway, stock selling did send 10 year yields down toward 2.8% vs 2.9% and the Pavlovian reaction is to sell bank stocks when those yields move lower. So they all got hit.
- Then there were the tariffs. While the US exempted a list of nations from the steel and aluminum tariffs announced a few weeks ago, they also announced 50B of tarriffs on China goods. China talked about raising tariffs on some US goods in retaliation, and also of selling some US treasuries which could be a story to follow next week. The Treasury will auction 2, 5 and 7 year notes next week.
Of course, by now we know the man, President Donald Trump, and his “Art of the Deal” which resolves around twisting arms, and when they say “Uncle”, bringing them to the table for ‘The Deal”. If they don’t say “Uncle”, he points and say’s “You’re fired!”
The market this week seems to be concerned that there might be less “coming to the table and deal making”, and more “You’re fired”. However, the “You’re fired” could come from both the US and China (i.e., a trade war). Time will only tell. China and General Secretary of the Communist Party of China Xi Jinping may be a little different than more democratically minded Canada, Mexico, or allies in Europe.
The general gist, is the markets don’t like uncertainty. There is a lot more uncertainty.
So, what happened in the forex market?
Well, the dollar was the weakest currency when the US day began on tariffs and the potential that China would fight back, and is ending as the weakest currency at the end of the day too.
The greenback lost most of the value vs. the JPY, as traders funneled funds into the “relative safety of that currency” as stocks fell. Honestly though, the moves were not all that material in the NY session. Traders seemed more focused on watching the stock markets gyrations/tumble, then positioning in a currency pair. PS at the end of the day, the Commitment of traders did show that the speculative position into dollar shorts spiked higher again. So the market seems positioned for it.
With the weekend upon us, the good news is the markets will be closed. The not so good news is the fear of what Monday might bring?
Does the weekend calm some of the fears, or intensify them as the media machine goes into crisis mode about our collective Facebook privacy, tariffs, trade, LIBOR rates and God knows what else.
Try not to let the fear ruin your weekend. Be safe. Have fun. Peace.