Stock Markets Maintain Bullishness as Mexico Avoids Tariffs

Global equities breathed a sigh of relief after President Trump showed markets he does not always have to be tariff man.  A solution on immigration was reached between the US and Mexico and it appears Mexico will avoid tariffs for now. Mexico will deploy 6,000 more troops to deter illegal migration and asylum seekers will be held in until claims adjudicated.  Trump claimed a document was signed, but Mexico’s foreign minister said that was not the case.

For now, markets will not worry about the Mexico and US relations and move the focus back to the ongoing Sino-U.S. trade war.  Trump also threatened President Xi that China would get hit with the next $300 billion of tariffs immediately if he did not attend the G20.

The S&P 500 rose for a fifth consecutive day, but the gains could become capped if we do not see any positive trade signs from China.  The recent global stock market rally was stemmed from expectations that the Fed will come to the rescue with a couple of rate cuts this year, but that will not likely deliver fresh record highs with the US indexes unless we see a scaling back of tariffs between the US and China.

Commodity currencies did not benefit from the Mexican led rally and underperformed mainly due to the steep decline in Chinese imports.  The trade war is driving concerns the Chinese will be buying less in the Q2 and that could keep the Aussie dollar and kiwi heavy.

Brexit – 10 candidates to become next Tory leader and next PM

Oil – Russia remains key to OPEC + production cut extension

Gold – Pares Recent Rally on Dollar Rebound

Treasuries – Turkey continues to abandon holdings



The Conservative Party have their 10 candidates on ballot for the first leadership election vote.  The candidates are Environment Secretary Michael Gove, Health Secretary Matt Hancock,  former Chief Whip Mark Harper, Foreign Secretary Jeremy Hunt, Home Secretary Sajid Javid,  former Foreign Secretary Boris Johnson, former Leader of the House Andrea Leadsom,  former Work and Pensions Secretary Esther McVey, former Brexit Secretary Dominic Raab, and International Development Secretary Rory Stewart.

All 10 candidates appear set on delivering the results of the 2016 referendum, with two seeking a no-deal Brexit.  Boris Johnson remains the front-runner but a lot often happens during the six-weeks of campaigning.  The top four, Johnson, Gove, Hunt and Raab all want to renegotiate Brexit and that would likely see markets remained concerned of a hard Brexit.

The next two weeks will see the field narrow after 300 Tory politicians narrow the field down to two candidates.  Once we have two candidates, and if no one drops out, we will see the 160,000 party members choose the next leader.  The final results are expected in the week of July 22nd.


Crude prices remain volatile and vulnerable to the downside after testing bear market territory.  Investors are pondering whether President Trump and his Chinese counterpart will be able to iron out a trade deal before damaging global growth even further.  The leaders of the two largest economies are expected to meet on the sidelines at the G20 summit in Japan at the end of the month.

Oil prices started the weak on strong footing after Saudi energy minister Al-Falih noted that there’s almost unanimous agreement in OPEC to extend production cuts and that Russia could agree before the current deal expires at the end of the month.  Russia remains key for the production side of the argument, but right now it appears concerns of global growth will trump any tightening of supplies.

Markets are likely to focus more on the trade front than OPEC + production cuts as we will most likely get an US-China trade update at the June 28-29th G20 summit and OPEC and allies are likely to meet during the first week of July.


Trade optimism sent gold buyers to the sidelines as markets participants bought risky assets after President Trump ended calls for punitive tariffs on Mexican goods after Mexico addressed concerns on immigration.  Gold prices fell around 1%, which was a modest decline after last week’s rally which was the best rise in over a year.

The yellow metal should remain supported if we continue to see high expectations for the Fed to deliver a rate at the July 31st FOMC policy meeting.  While the labor market has seen some softness, the key to rate cuts may come from the lack of inflation we are seeing at the end of this current economic cycle.  Expectations are for this week to see soft price pressures as both PPI and CPI readings are expected to deliver monthly declines.


Treasury yields rallied today as risk-on flows eased demands for safe-havens and as Turkey continues to unload ownership of Treasuries.  Turkey now only holds roughly $2 billion of US government bonds and given the steep decline over the past year, investors will see the Turkish Central Bank possibly struggle to defend the lira over the next crisis or possibly make good over their currency obligations.

Many investors missed out on the precipitous fall on Treasury yields.  In early May, the yield on the 10-year Treasury yield was around 2.50%, but now it is hovering around 2.15%, with many expecting for test of the 2.00% handle.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya