Mounting political risks - Nomura
|
Analysts at Nomura explained that. on Tuesday, Trump escalated trade tensions by proposing a 10% tariff on $200bn Chinese imports.
Key Quotes:
"China responded by stating that it would be forced to reciprocate the escalation. Initial market reactions were risk aversion, but moves (particularly in the G10 FX space) were limited. USD/JPY – a trade war proxy – has rebounded, testing 112.50 this week. We see risks of a relief rally in risk assets if negotiations between the US and China materialise."
"UK politics was also in the spotlight this week, with the surprise resignations of Brexit Secretary David Davis and Foreign Secretary Boris Johnson. The Chequers agreement is clearly a move towards a softer Brexit, in our opinion, with room to be softened further. However, near term the market will likely continue to balance this with the prospects of a leadership challenge for Theresa May."
"We cut GBP/CAD shorts this week with much uncertainty ahead, but as soon as we have a clear signal that Theresa May can bat on without the Brexiteers holding her back GBP should start heading higher. But things may get worse before they get better."
"At yesterday’s meeting, the BoC hiked rates, as was widely expected. Overall, the statement struck a similar tone to May’s meeting. Initial market reactions were to interpret the statement as hawkish, but these moves have since reversed. Overall market expectations appear to have been little changed. We believe the BoC remains attuned to trade and data developments, which continue to pose downside risks to the outlook."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.