Tariff postponement rally fizzles

Safe-haven currencies are lower across the board as US equities targeted four-month highs on continued optimism that the trade war between the US and China is progressing towards a constructive agreement.  Overnight risk appetite surged after President Trump signaled that he will postpone the date for raising tariffs on Chinese imports.  The global stock market rally pared gains after the European close.

The financial markets are heavily convinced that the trade war between China and the US will end because both sides have too much to lose if talks fall apart.  China is struggling to reform their economy and as growth appears ready to fall to the lowest level in three decades, a resolution in the trade war will likely stabilize growth concerns and make it easier to resume the path in becoming a consumer driven economy.  For the US, President Trump knows his path to re-election will heavily rely on having the economy clicking on all cylinders and the effects of a lingering trade war will prevent him from doing that.

USD – Base case remains growth is slowing

GBP- Corbyn succumbs to new Brexit referendum

Oil – Trump tells OPEC to relax

Stocks – winning streaks everywhere

Metals – mixed on China


The greenback was mostly softer against the high-beta currencies as investors rolled back safe-haven positions after US President Trump signaled he will delay raising tariffs on Chinese imports.  Traders are awaiting fresh clues on whether the US economy will continue to weaken, with many highlighting Thursday’s release of fourth quarter GDP.

The expectations for a recession appear to be a key focal point for many market participants.  While the 10- and 2-year yield curve remains around 16 basis points from inverting, the 1-and 5-year yields have remained inverted since the end of December.  The Fed’s dovish pivot in January has prevented 10s and 2s from narrowing further and many will look to see if we have a soft GDP position solidify that the next move from the Fed could be a rate cut.

The dollar could remain vulnerable in the short-term if we see Fed Chairman Powell’s testimony on Capitol Hill emphasize the recent weakness in the economy and if he provides further clarification that Fed’s balance sheet unwinding is likely to end this year.  Any mistake by the Fed chair could spell disaster for risk assets.


The British pound rallied around 1.31 after UK opposition Labour Party Leader Jeremy Corbyn caved to supporting a new Brexit referendum due to fear more members would resign.  Last week, he lost 9 members and fears were growing he would lose more if he did not shift positions.  The support of a new Brexit referendum does not necessarily mean it will happen.  Labour does not want to be forced into accepting May’s current Brexit deal and as the clock continues to wind down towards the March 29th deadline, expectations are still high we will see Article 50 extended, and that the UK will avoid a no-deal Brexit.


President Trump’s morning tweet, “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!” delivered a strong message to Saudi Arabia.  OPEC coalition’s production cuts have stabilized oil markets, but the extra efforts from Saudi Arabia and cuts to exports to the US have helped crude rise even faster.  The US is well aware that their sanctions on Iran and Venezuela are also helping oil prices remain bid and they are not in a position to abandon those stances.  In the short-term, President Trump may continue to try to talk down oil until US shale production picks up again in the summer months.

Several analysts expect oil prices to finish the year much lower than current levels.  The timing of the President’s tweet could be extremely ideal as he may have helped nudge many oil traders in closing out bullish positions.  Oil was in overbought territory and approaching key resistance levels.


The S&P 500 index is attempting to have its 10th straight week of weekly gains.  The Nasdaq is also having its longest winning streak since 1989, while the Russell 2000 is posting its best streak since 1996 and the Dow Jones Industrial Average reached its best run since 1995. The bullish rally has also taken over 90% of the stocks in the S&P 500 index above their 50-day moving average, a potentially positive sign that stocks could see higher highs.


Safe-haven metals pushed lower after President Trump signaled he would delay a planned increase in tariffs on Chinese imports.  Both gold and silver traded lower while the industrial metals: copper, nickel and zinc all traded higher due to a strengthening yuan and easier credit conditions.


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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 TradeTheNews.com, 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