Last Wednesday we noted that hope of a decline in tensions between Washington and its trading partners had encouraged the market to recover its risk appetite and had eased the pressure on safe havens. In that context, the Swiss franc traded over 1.1400 against the single currency after touching 1.1243 in mid-August. It was a short-lived respite, however, as the franc is once again strengthening. It reached its highest value for the year on Friday, trading at 1.1239 against the single currency. Uncertainties of ongoing trade disputes – and, with them, pressure on the Argentine, Turkish and South African currencies, among others – are back to the fore after Donald Trump threatened to withdraw the US from the WTO. Thus, the Central Bank of Argentina raised its key rate from 15% to 60% to defend the peso. Under the effect of this surprise decision, however, the peso plummeted and lost nearly 20% of its value against the dollar. The Turkish lira also remains under pressure after the publication of price figures that revealed a 17.9% increase in August on an annual basis – the highest level since the end of 2003. The Central Bank of Turkey has stated that the increased inflation is a sign of the risks to price stability. The next monetary policy meeting, scheduled for 13 September, is now highly anticipated. While the central bank had opposed a rate hike in recent weeks, on Monday it released a statement recognising that its monetary policy could see some adjustments. Lastly, the South African rand is also experiencing turmoil. GDP figures – a 2.6% decline in the first quarter, and a further 0.7% decline in the second quarter (against an expected 0.6% increase) – have unsettled the markets, causing the rand to plunge by more than 3% against the greenback during the course of the day yesterday. Moreover, the US president is back to attacking Canada. “There is no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out”, he said on Saturday.

As for inflation, which is closely monitored by the Fed and the European Central Bank in the context of their monetary policy, it has followed opposite trajectories on both sides of the Atlantic. The consumer price index grew by 2.9% in July in the United States, the highest level in six years, as it fell in the eurozone in August to 2%, from 2.1% previously.

In Australia, the central bank kept its rates on hold as expected at 1.50% after its monetary policy meeting on Tuesday. Governor Philip Lowe said: “The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time”.

In Russia, as the rouble has continued to lose value against the dollar since early 2016, Central Bank Governor Elvira Nabiullina broached the possibility of a rate hike at the next central bank meeting. “There is a significant number of factors for holding the rate and some factors have appeared that allow putting the option of a possible rate increase on the table”, she stated.

Back in the US, Amazon became yesterday the second company to be valued by Wall Street at $1 trillion after Apple, which was the first to hit the $1-trillion mark on 3 August.

On the agenda today, we have the meeting of the Central Bank of Canada. The consensus is in favour of an unchanged key rate at 1.50%, and there will be no press conference afterwards. Discussions between the United States and Canada are resuming today as part of the renegotiation of the NAFTA agreement and should remain tense. On the economic front, US employment figures will attract most of the attention this Friday at 2:30 p.m.

Levels

EUR/USD  1.1570 DOW JONES 25’0952.48
USD/CHF  0.9745 SMI 8‘951.89
EUR/CHF  1.1275 CRUDE OIL 69.15
USD/RUB  68.40
XAU/USD  1’1995.00