Asia Pacific Market Open – US Tariffs, Brexit, British Pound, Swiss Franc, Australian Dollar
- US rolling back tariffs rumor fueled stock and FX volatility, markets were ultimately disappointed
- British Pound soared, anti-risk Swiss Franc fell as second Brexit referendum bets kept increasing
- Disappointing Netflix earnings report, S&P 500 futures pointing lower may fuel risk aversion next
See our study on the history of trade wars to learn how it might influence financial markets!
Stocks and foreign exchange markets went on a wild ride towards the end of the US trading session. News that the White House would consider rolling back tariffs on China was quickly followed by comments to the contrary from Treasury Secretary Steven Mnuchin. After climbing about 0.9%, the S&P 500 headed back down as quickly as it climbed.
Amidst this chaos, the British Pound continued building gains against its major counterparts since UK Prime Minister Theresa May lost the vote on her Brexit deal in Parliament. This seems to be because of increased speculation of a second Brexit referendum. Jeremy Corbyn, leader of the opposition Labour Party, left the door open to one today (although he prefers a general election).
Meanwhile UK Prime Minister Theresa May, who along with Donald Trump, announced that she will not be attending the World Economic Forum Annual Meeting in Davos. Instead she has plans to focus on outlining a “plan b” with lawmakers for Brexit by early next week. She mentioned that an Article 50 extension will not be needed at this point. Sterling seemed to have taken these developments for granted.
Due to the gains in the British Pound, the US Dollar lost some ground. Meanwhile the anti-risk Swiss Franc underperformed, more so then the similarly-behaving Japanese Yen. This may have been due to the news from the UK which from a regional perspective, made CHF even less appealing as European shares traded higher (after gapping considerably lower). The DAX still ended the day about 0.12% down as a result.
The pro-risk Australian and New Zealand Dollars trimmed some of their gains due to the conflicting trade news from the world’s largest economy. But, more declines may be ahead. S&P 500 futures are pointing cautiously lower and Asia Pacific benchmark stock indexes could be at risk. Netflix shares tumbling in after-hours trade amidst a disappointing earnings report is also concerning.
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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter