US Brandishes Tariff Weapon And Weakens Animal Spirits

It is not clear why the US deemed it necessary to put the tariffs back on Argentina and Brazil and to the extent, their currencies have weakened, it is a sign of a troubled economy, not a crafty manipulator. Perhaps they are being punished because farmers in Argentina and Brazil compete with US farmers in third markets, especially China. The US fights a rearguard action. China's market for Brazil's agriculture is ten-times larger than the US market for Brazilian steel. The value of Argentinan soy exported to China is three times the value of Argentina's shipments aluminum and iron pipe to the US, according to Bloomberg.

Trump has suggested that there is unlikely to be an agreement with China this year and suggested it might be preferable to wait until after next year's election. Outside of US auto sales, the North American economic calendar is light, leaving investors to contemplate the implications of the deterioration in the trade situation over the past 24-hours. Brazil reports Q3 GDP. It is expected to have risen by 0.4%, the same as Q2 and 1% on a year-over-year basis, also the same as in Q2. 

The Canadian dollar was one of the few major currencies not to have gained against the greenback yesterday. It is little changed today. The US dollar continues to straddle the CAD1.33-level. The technical condition has not changed. The MACDs are elevated but have yet to turn down.  The Slow Stochastics are trending gently lower. Only a break of CAD1.3260 or CAD1.3330 signals anything of note. The US dollar is little changed against the Mexican peso. Its recent uptrend is intact, and the trendline is near MXN19.45 today. On the topside, the MXN19.60-MXN19.65 needs to be overcome to signal the next leg up.  

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Read more by Marc on his site Marc to Market.

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