Summary:

  • Canadian dollar falls slightly as a deadline set by Speaker Ryan has just passed
  • China offers the US a trade deficit reduction package worth $200 billion
  • Asian stocks grind subtly higher, grains rise over 1% each as drought threats crops

17 May had been set by Speaker Paul Ryan as a date to hammer out an accord in terms of the North American Free Trade Agreement (NAFTA), but it looks that neither progress was made, and as a result no deal was struck. Moreover, according to American trade negotiator, Robert Lighthizer, the countries involved in talks were “nowhere near close to a deal”. A sticking point might be found in many areas like intellectual property, agriculture, energy. Of course it does not mean that talks will be postponed and Lighthizer ensured that negotiations will be continued and he still “looks forward to working with his counterparts to secure the possible deal for American farmers, ranchers, workers and businesses”. Nevertheless given this year’s midterm elections to the US Congress chances that no deal will be ratified this year increased. Keep in mind that US President Donald Trump pushes to rewrite the NAFTA agreement as he claims it is unfair and does not benefit American people as it should. However, the latest remarks could be a bit strange as prior to this headlines there were many upbeat opinions that a final deal can be struck soon. Anyway, lack of an end of negotiations is positive neither for Mexican peso nor Canadian dollar, but both currencies have barely responded to these comments to be honest. Notice that the latter waits for a package of key macroeconomic releases later today which we are going to write about in a daily calendar post.

link do file download linkThe EURCAD moves slightly higher in early trading on Friday, and it seems that this day close could be remarkably relevant as the pair is not trading below its long-term trend line. Source: xStation5

Trade threads undoubtedly dominated Asian trading hours as China informed that it had reportedly offered US President Trump a package of proposed purchases of US goods aimed at scaling back the US trade deficit with China by roughly $200 billion a year. According to US officials familiar with the offer it was made during US-China trade talks in Washington, and was meant to resolve tariff threats between the two largest economies in the world. Stock traders should not miss some leaks we got thereafter as US aircraft maker Boeing would be a major beneficiary of the China’s offer.

link do file download linkThe US holds a huge and still swelling trade deficit with China. Source: Bloomberg, XTB Research

Summing up the Asian session one may conclude that there have been little moves across stocks on balance most of major indices are set to end this week in modest gains (except for the Australian benchmark being traded marginally lower). Looking elsewhere it is worth keeping an eye on grains such as wheat, soybean and corn as they are up 1% each in the morning. Yesterday we experienced a larger increase in wheat prices fuelled by concerns with regard to drought in the US southern Plains as well as in Australia where the crop season is just getting started so there is still time for improving moisture conditions. To find out more on grains click here.

link do file download linkAfter a bullish breakout corn prices are trying to recoup last week losses and if they manage to do so, it could bode well for the future. Source: xStation5