The USMCA rally faded overnight Monday. The charge that the new acronym was just a “new and improved” NAFTA stuck just like the steel and aluminum tariffs. The larger backdrop for the risk-off tilt was in the Chinese response to the U.S. warship in the South China Sea, writes Bob Savage.
Of course, there was other news – RBA met and didn’t change rates for the 29th consecutive meeting. The Italian lower house budget committee chair said it would have been easier to solve its budget woes with the Turkish lira (TRY) not the euro (EUR) while the European Commission warned of a Greek-style crisis.
PM Conte tried to calm the markets, saying “the EUR is our currency and is irreversible for us.” Italy’s DiMaio says the EU is using market “terrorism” over its budget.
UK PM Theresa May has set out the government's post-Brexit immigration plan. In a sign that the acrimonious rhetoric on both sides has yet to die down, UK Foreign Minister Jeremy Hunt has claimed that the UK is very angry with the EU’s approach to negotiations.
Oil mostly held its 3% gains from Monday and continues to trade near 4-year highs. This puts the EUR into the spotlight as the EU faces UK and Italy ire and oil price pressures put the ECB behind the curve but many see it limited by financial stability needs. So the greatest trade deal in history a rewriting of NAFTA was not sufficient to hold together hopes for Europe. This makes nothing – even the USD decline – irreversible.
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