25 January, 2018
Yesterday, Senior US Officials took the lead from their President and made clear the US position on Trade. Commerce Secretary Wilbur Ross took aim at China, saying the Chinese 2025 technology plan is a ‘direct threat’ to US technological dominance. The Chinese plan aims to support and develop sectors of their economy such as artificial intelligence, electric cars and electronics. Of concern to the US is IP theft and encroachment. Earlier, he said that the reaction from the US is because of inappropriate behaviour of trading partners. Adhering to global trade rules isn’t protectionist and the US is often accused of protectionism. There will be a very busy trade agenda in terms of those actions by the US. He also said trade wars are fought ‘every single day’ and it was up to the Chinese to decide if they want to retaliate. If there is a reaction from China then the US would weigh its options. But there will be more tariff measures to come.
US Treasury Secretary Steve Mnuchin said that ‘a weaker dollar is good for the US’ and that it was good for trade. He also said the vote from the market on tax reform is very positive, and that he is not particularly concerned about China’s US treasury buying, and that it’s not an issue in talks with China. Tax reform brings back trillions of Dollars to the US. The US Dollar index has been driven to a three-month low and is weaker against other currencies.
In reaction, China’s Ministry of Commerce attempted to cool the situation by saying they hope to handle frictions with the US in the proper manner. China is to take appropriate measures against unilateral moves. They are always open to dialogue and cooperation with the US. China doesn’t want an escalation of trade spats with the US. The outlook for trade frictions in 2018 is still severe.
German Markit Manufacturing PMI (Jan) was released at 61.2 v an expected 63.0, from 63.3 previously. Markit Services PMI (Jan) was 57.0 v an expected 55.6, from 55.8 previously. Markit PMI Composite (Jan) was 58.8 v an expected 58.6, from 58.9 prior. EURUSD rallied from 1.23120 following this data release.
Eurozone Markit Manufacturing PMI (Jan) was 59.6 v an expected 60.3, from 60.6 previously. Markit Services PMI (Jan) was 57.6 v an expected 56.4, from 56.6 previously. Markit PMI Composite (Jan) was 58.6 v an expected 57.9, from 58.1 prior. EURUSD moved higher to 1.23557 from 1.23397.
UK Average Earnings Excluding Bonus (3Mo/Yr) (Nov) was 2.4% v an expected 2.3%, from 2.3% previously. Claimant Count Change (Dec) was 8.6K against an expected 5.4K, from a previous reading of 5.9K, which was revised up to 12.2K. ILO Unemployment Rate (3M) (Nov) came in as expected, unchanged at 4.3%. Average Earnings Including Bonus (3Mo/Yr) (Nov) was also as expected, unchanged at 2.5%. Claimant Count Rate (Dec) was 2.4% from 2.3% previously. GBPUSD moved higher into resistance at 1.41182 following this data release.
US Housing Price Index (MoM) (Nov) was 0.4% against an expected 0.3%, from a reading of 0.5% previously, which was revised up to 0.6%.
US Markit Manufacturing PMI (Jan) was 55.5 v an expected 55.0, from 55.1 previously. Markit Services PMI (Jan) was 53.3 against an expected 54.0, from 53.7 previously. Markit PMI Composite (Jan) was 53.8 against an expected 53.5, from 54.1 prior. USD crosses may be heavily traded as a result of this data.
US EIA Crude Oil Stocks Change (Jan 19) came in with a smaller draw than expected of -1.071M. The previous reading from last week was -6.861M. The expected reading this time is in the region of -1.600M. WTI rose to $65.40 from $64.53.
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