NAFTA rally short lived

The relief following the new NAFTA deal did not last long. A day after Canada and US finally clinched a trade deal European and some Asian markets are back in negative territory.

The relief following the new NAFTA deal did not last long. A day after Canada and US finally clinched a trade deal European and some Asian markets are back in negative territory.

Expectations that the agreement would somehow translate into the easing of trade tensions with China proved wishful thinking – President Trump poured cold water over those with a sobering comment. Unlike the markets, US officials believe that Trump’s approach will eventually wear China down by stifling foreign investment and discouraging companies to use China as part of their production chain, such as in the case of Apple and its iPhones, and forcing the country to agree to the concessions asked by the US. The currency markets also swung in the opposite direction from yesterday and the Canadian dollar, which rallied in the aftermath of the new NAFTA deal, lost yesterday's gains to the greenback. The dollar firmed against the pound and the euro but notched lower against the yen.

Oil in a frenzy ahead of sanctions

Oil is trading at almost $85 as the market is talking itself into a frenzy ahead of Iran sanctions at the beginning of November. Iran exported slightly less oil in September but in the case of previous sanctions there was a last minute burst of higher exports just before the restrictions kicked in, a pattern that could be repeated over the next month. More expensive oil combined with higher metal prices generated moderate gains for big oils and miners and they are leading the FTSE gainers this morning.

Pound holds against euro

The currency market is keeping a keen eye on the annual Conservative Party gathering in Birmingham which is more loaded than usual given plans by a small number of MPs to challenge PM Theresa May’s leadership. She fended off her attackers on Tuesday saying she expects to keep her position for the long term. But a day is long time in politics and with two more days of conference to go all outcomes are possible. The sterling/euro pair has been fairly steady overnight, trading nearly flat.


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.