Hemorrhaging Resumes

President Trump signaled that payment for some tariffs will be deferred. The tariffs are not the ones levied on Chinese goods or the controversial tariffs on aluminum and steel on national security grounds. The import tax that is part of the "most favored nation" non-discriminatory will be deferred for 90 days. Footwear and apparel are the big examples, but imported light trucks also will be included. These are like the deferral of the April 15 tax date. The net impact is to boost the liquidity of the taxpayer. It seems to be a tacit acknowledgment of what it seems like everyone knows. Importers pay the tariff, even if it leads to fewer sales by the exporter. Separately, talk of a fourth fiscal package is being discussed, and Trump suggested that should be as much as $2 trillion, which would include a large infrastructure commitment.

Today's US economic reads come primarily from the private sector. The PMI and ISM are expected to show a hit to the US manufacturing sector, but more interest may be on the ADP's private-sector job estimate and the auto sales figures. The median forecast in the Bloomberg survey calls for a loss of 150k jobs in ADP's estimate, which would appear to only be an inkling of what is to come. The weekly jobless claims are the closest to a real-time read of the labor market. Note that NY Governor Cuomo indicated that between March 23 and March 28, the NY Department of Labor got 8.2 mln calls. Typically, it gets 50k in a week. Its website had 3.2 mln hits, almost a 10-fold increase. Auto sales are forecast to slump toward 12 mln (seasonally adjusted annualized rate) down from 16.8 mln in February. Separately, Canada and Mexico report their PMI figures. Mexico also reports March worker remittances. It is an important source of capital inflows into Mexico. Last year, it averaged about $3 bln a month. It may be a little early to see the impact of the economic hit in the US.  

The risk-off environment and the inability of oil to sustain even modest upticks are taking a toll on the Canadian dollar (FXC). So far today, the US dollar is inside yesterday's range against its Canadian counterpart (~CAD1.4010-CAD1.4350), but it is looking firm. A move now back over CAD1.4300 could spur a move toward CAD1.4400. The Mexican peso is also on the defensive. The US dollar has pushed a little above yesterday's high (~MXN24.15). The next targets are in the MXN25.45-MXN24.55 area. Last week's record high was near MXN25.46. Elsewhere, note that Chile cut its overnight rate to 50 bp from 1% and extended its bond purchase program. The US dollar closed at a record high against the Brazilian real (BZF) (~BRL5.2060). It reports February trade and industrial production figures today.  

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Read more by Marc on his site Marc to Market.

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