Market update: Canada and Mexico given a deal they can’t refuse, the EU rejects May, Bitcoin drops

8 Mar

by Mihály Tatár


Good Morning!


  • Markets were relieved to hear directly from Trump’s trade chief, Peter Navarro, that Canada and Mexico may get an initial exemption from the tariffs if they agree to a ’satisfactory NAFTA agreement’, and that other US allies may get exemptions, too (SPX -0.05%, DAX +1.09%, Nikkei +0.40%, even Shanghai +0.52%, US 10Y yield 2.87%). It’s worth mentioning Navarro’s argument, however (’we are the freest trader in the world, hands down. All we get for that is a half a trillion dollar a year trade deficit that offshores our wealth and jobs’), so what the market sees as Trump backing down somewhat is in reality the US simply dividing its trade rivals by their own interests. Today, traders will focus on the ECB rate decision meeting (no policy change is expected, the question is whether there will be any hawkish turn in wording – after all, the Eurozone just grew 2.7% Y/Y in the fourth quarter), and the EURUSD is waiting patiently at 1.24.


  • While the EU played the champion of free trade against the US, it forcefully rejected May’s proposal to keep the UK accessing the single  market – particularly its banks – and Donald Tusk even said it ’doesn’t share the goal of making a success of Brexit’. (Instead it offered a trade deal on the model with the one on Canada, which restricts services cooperation, for example.) The EU, however, doesn’t want a trade deal with tariffs or quotas, because – as one commentator put it, ’they sell a lot of cars’. As said before, the British government clearly has competency problems in these negotiations – Chancellor of the Exchequer Philip Hammond, for example,  called a deal without services ’unfair’ (heh?) and said that it is in the EU’s interest to keep London as a financial hub (excuse me?). (It is clear that the UK should have run to make full-friends with Trump after the US elections and try to make Brussels fear of an ’Anglo-Saxon trade bloc’ to get a friendly deal.  It seems this never occured to anyone in May’s circles and after this, both Remain and Brexit voters will be very angry.)


  • Cryptocurrencies had another rough 24 hours again (Bitcoin dropped 16% from Monday, to 9500 USD, a far cry from reaching nearly 20.000 USD in December), as both Japan’s Financial Services Authority and the US SEC went after crypto trading platforms, and Binance, one of the largest crypto exchanges, was hacked and forced into ’errant trades’. (One has to wonder when the excited retail crowd, entering last year, will throw in the towel.)


Have a nice day,



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