Trade war moves to Europe

3 minute read


As far as economic data were concerned, the USD did not really have skin in the game. The 0.5% decline in factory orders reported for February was close to the -0.6% forecast and made no difference to the USD.

The Trump trade war took another, not entirely unexpected, twist when the administration floated the idea of punitive import tariffs on French cheese and other products from Europe. Also on the list are helicopters, wine, ski suits and unmounted prisms. The sense is that the president is tiring of China and wants to open a new front.


That trade war story was unhelpful to the EUR. With troubled banks, an uppity Italian government, stagnant growth in Germany and Brexit the EU has enough on its plate without the US president introducing yet more friction into international trade.  

Euro zone data this morning were few and entirely unremarkable. Italy's retail sales in February were up by 0.1% on the month and 0.9% higher than the same month last year. Both numbers were disappointing relative to analysts' forecasts but not different or important enough to affect the EUR. It is 0.4% higher on the day.


The Canadian data did a good job of neutralizing one another. Building permits fell by a monthly 5.7% in March while housing starts went up by 15.8%. The numbers did not affect the CAD.

Investors were far more interested in oil. An escalation in the civil war between military factions in Libya puts at risk more than 300 trillion barrels of oil. The possibility of that supply being cut off drove WTI crude another 2% higher on Monday to a new five-month high. The Loonie tracked the oil price, adding 0.6% against the USD.


It was all about Brexit again for sterling. Unfortunately there was not much going on in that direction. Talks between the government and the opposition, intended to produce a deal upon which both factions could reluctantly agree, seemed to be getting nowhere. A Conservative MP's call for a second referendum on Theresa May's leadership was rebuffed by the chairman of the backbenchers' committee.  

The one - widely-anticipated - breakthrough was that the House of Lords passed into legislation the bill which gives parliament, in theory, the power to prevent Britain leaving the EU without a deal. Sterling is 0.4% higher on the day.


Oil supply worries and the possible involvement of Europe in Trump's trade war encouraged a more cautious approach by investors. The safe-haven yen is higher on the day against the USD, though only by 0.1%.

There were no Japanese data to color the picture for the JPY. Tonight brings the domestic corporate goods price index as well as machinery and machine tool orders.  

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