The US-Chinese trade war remains the main driver in the financial markets. The absence of any new measures on both sides allowed the markets to recover a little yesterday, the S & P 500 added 0.58%. Gold futures stood before $ 1,300, but the lull is unlikely to be long, and panic may resume at any time.
Meanwhile, the volume of retail sales in the United States unexpectedly fell in April by 0.2%, an increase of 0.2% was predicted. Growth in consumer spending slowed to 1.2% y / y, that is, to a minimum for the year.
The decline in consumer activity is one of the main factors that bring the recession closer. The dynamics of the yields of inflation-protected Tips clearly illustrates this process; if a year ago the yield reached 2.16%, then the next peak in October was formed at the level of 2.07%. The last one in March is already at the level of 1.88%, and the trend is negative. This means that inflation in the US in the next couple of months may well fall to 1.6%, and this will be a direct call for the Fed to lower the rate.
It is no coincidence that Trump has repeatedly called on the Fed to lower rates in order to spur economic activity. Trump is considering this possibility as one of the steps that will allow the US to defeat China in a trade war.
Along with the weakening of consumer demand, industrial output fell by 0.5% in April. Production capacity utilization was 77.9% against 78.5 % a month earlier. The physical volume of US-manufactured goods is declining, despite tax reform and the desperate attempts of the Trump administration to get the most favored treatment from major trading partners. Trump was able to quite quickly break the resistance of Mexico and Canada and reformat the NAFTA agreement in his favor, there is no doubt that the ongoing negotiations with Japan will also be completed effectively, after which Europe's turn will come. However, it's not even the result of the new administration.
There are no changes in the structure of the US economy, as there is no positive dynamics. The ratio of industrial production to GDP continues to decline, that is, no emergency measures lead corporations to return their production assets to the United States. Neither tax reform, oil production growth, nor trade barriers help.
The steady growth of the labor market also causes skepticism. The growth of new jobs is proceeding at the same rate as the growth of falling out of the labor force. Their ratio is at minimal levels, which clearly indicates that the positive dynamics of the labor market is only the result of manipulating statistics.
The US is not interested in a trade agreement with China, but in its full and unconditional surrender. Only such a result will allow "to make America great again," any other will inevitably bring the recession closer.
USDCAD
The Canadian dollar continues to trade in the range, while maintaining stability against the background of a decline in kiwi and aussie. The reason is not only stable oil prices, but also a good internal dynamics - business activity, according to Ivey, steadily keeps above 55p. The growth of average wages maintains stable inflation at a target level of 2.0%. The Bank of Canada has not yet expressed any intention to lower the rate or take more measures to mitigate monetary policy.
The trade balance is steadily surplus. Financial flows are stable. The report on the movement of foreign capital. There are no reasons to assume that the Canadian has decreased. Support 1.3375 / 80, resistance 1.3490 / 3505, slightly more likely to move up to the border of the range.
USDJPY
The Bank of Japan does not intend to make changes to the monetary policy until 2020, and the yen dynamics are shaped by both a reassessment of market risks and a slowdown in the growth of the money supply. Both of these factors are in favor of the yen so far, so the decline in USDJPY seems logical. The yen will move to support 109.00 / 15, it is logical to use growth attempts for sales.
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