Moving the trade war on

4 minute read


In the statistical arena investors had little more to shape their view of the USD than the Bureau of Labor's consumer price index data. The numbers did not give them a whole lot to play with. Headline inflation slowed from 2.0% to 1.8% while the more important "core" measure - ignoring food and fuel prices - slipped from 2.1% to 2.0%. Both numbers were lower than expected. On one hand the figures did not look soft enough to force the Fed into a rate cut next Wednesday: on the other, nor were they punchy enough to prevent one. 

The trade war moved no closer to a denouement. Journalists were told by the president that whilst he does have a deadline in mind, "it's up here" in his head. A new development saw the president turn his attention on Germany, where a pipeline is being constructed in the Baltic Sea to bring natural gas from Russia. Trump would prefer Germany to buy it from the US and ship it across the Atlantic so he threatened Berlin with sanctions.


On the receiving end of that threat Chancellor Merkel was not quick to respond. She is known to take a dim view of diplomacy by Twitter. Anyway, she has other problems to deal with in Europe. Italy's latest great idea is the issue of "mini BOTs" by the Italian treasury, undated small-denomination IOUs. But there are existential problems before they even get off the ground. If they are just tiny government bonds they will inflate the country' debt and are therefore not allowed by the EU. If they are not bonds they are, in effect, money and are therefore not allowed by the EU.

Euro zone economic data did not add much to the debate this morning. The two measures of German inflation were unchanged at 1.3% (HICP) and 1.4% (traditional). Euroland industrial production fell 0.5% in April and was down by 0.4% on the year.  No surprises there. The EUR is 0.4% lower against the USD.


The Loonie is down by 0.2% against the USD. Its movements over the last 24 hours had everything to do with oil prices. WTI crude fell on Wednesday, touching below $50 before steadying, and rallied sharply this morning, jumping a dollar and a half in less than 30 minutes. Yesterday's fall was a by-product of a general concern about global growth. This morning's rally was sparked by attacks on two oil tankers in the Gulf of Oman.

There were no Canadian data on Wednesday but the oil stories were quite enough to keep the CAD motoring. Today Statistics Canada reports on new house prices.


Brexit stalks the streets again as the Conservative party holds the first of a series of votes to choose a new leader. The bookies' favourite , Boris Johnson, opened his campaign yesterday with a speech in which he was adamant that Britain would leave the EU on 31 October, with or without a deal. He is not the only contender to hold that view and, on paper at least, a no-deal Brexit is the more likely outcome.  

Parliament held a vote that might have stopped a no-deal Brexit but the proposition was defeated by 309 votes to 298. Some say it was the last chance for Parliament to prevent Britain  leaving the EU with no plan for a future trading relationship. The GBP is down by 0.6% on the day.


The JPY and USD are almost unchanged against one another, with the yen a fraction behind. Whatever the nervousness about trade and the global economy, investors felt no undue urge to favour the safe-haven yen and even gold was flat on the day.

Japan reported overnight on cross-border investment flows and business activity. The Ministry of Finance Business Outlook Survey came in at -10.4 for the second quarter, down by three points from March.

Sign up for a free account

Sign up for a free account

Access our convenient and secure online platform to process your international payments. Manage beneficiaries and view payment status and history at the click of a button.

Find out more
FX business solutions

FX business solutions

We provide tailored services to help companies make international payments and manage their foreign exchange risk

Find out more