The latest move by the Trump administration in the U.S.-China trade war stunted the recovery of global stocks as markets braced for the impact of yet another escalation. The dollar was able to advance on the risk-off mood as other currencies dipped from the risk of a changing trade landscape. The Bank of Canada rate hike has the loonie lifting.
China vows retaliation to $200B in tariffs
The United States is moving forward with additional tariffs on $200 billion worth of Chinese goods, prompting global market to roil and China to promise retaliation.
Chinese officials said they were completely shocked by the latest move in the burgeoning trade war and said they would file complaints with the World Trade Organization.
The yuan fell on the news and the Japense yen, which usually benefits from risky environments, also declined against the dollar. USD/JPY reached higher to 111.2.
Bank of Canada rate hike dips USD
The USD/CAD pair was trading up as high as 1.317 Wednesday morning ahead of the Bank of Canada’s rate hike.
The risk of global trade pressured the Canadian dollar more than the anticipation of the Bank of Canada’s rate hike helped the currency. However, as soon as the rate hike became official, the USD/CAD pair plunged to 1.308.
The BoC raised interest rates as expected from 1.25% to 1.50%. The accompanying monetary policy statement is being digested still.
EUR/USD holding above 1.17
The euro dropped against the U.S. dollar, falling as low as 1.169 before bouncing up to 1.175 on positive commentary from a member of the European Central Bank.
Banque de France Governor Francois Villeroy de Galhau suggested that the first raise of interest rates could take place in summer 2019.
Thursday we’ll see the monetary policy meeting minutes from the ECB’s last meeting, which could give us more insight into when rates will change. The U.S. consumer price index data is also due tomorrow, so we could see these two events influencing the EUR/USD pair.
May’s plan gets pushback
U.K. Prime Minister Theresa May is seeing opposition from Tory rebels on her Brexit plan, prompting the GBP/USD pair to fluctuate around 1.325.
The coordinated resignation of two Tories before May’s press conference with Angela Merkel keeps the pressure on her to be tougher during the E.U. negotiations. May promised a “swift and orderly Brexit” as Merkel gave a slight endorsement of her plan.
Cable didn’t show any extreme reaction to the latest round of tariffs from the U.S. on Chinese goods.