US equity markets in meltdown as Mnuchin meets with Bank CEOs
December 24, 2018
Sterling traded in a relatively tight range for most of last week, and remains calm this morning as global equity markets continue to flash red. There was little newsflow of relevance to sterling over the weekend, as the usual holiday lull in politics set in. The only data of note this week will be Friday’s High Street Lending figures at 09:30 GMT from UK Finance.
The euro had a dramatic end to last week, falling a full percentage point against the US dollar amid weak data flow and general investor nervousness stemming from the equity market rout. The European Commission’s official Consumer Confidence indicator fell to -6, a fresh low for the year. This morning US Secretary of Commerce Wilbur Ross said that automobile tariffs against European manufacturers were still an option, while also recalling US financial aid to europe after the second world war. Ross was 11 years old when the Marshall Plan began in 1948.
The US dollar is trading slightly lower this morning, amid a full blown equity market meltdown that saw US Treasury Secretary Steve Mnuchin take the bizzare step of calling a meeting with major bank CEOs. Mnuchin announced the meeting in a press release and on Twitter, where the move was met with widespread derision by retail traders, many of whom noted that the announcement of emergency meeting with Bank CEOs is not likely to calm frayed nerves in the market. Mnuchin will reportedly speak with the Fed and the SEC later today. Between Mnuchin’s efforts, last week’s high profile resignation by Defence Secretary Jim Mattis, and Bloomberg News reporting President Trump has discussed firing Fed Chairman Jerome Powell, the Trump administration appears to be in a tight spot over the holidays and further developments could easily prove relevant for USD.
OPEC’s planned production cuts haven’t even taken place yet, but pledges to extend or even deepen the proposed supply cuts are already being aired by member states following the continuing slide in crude prices. OPEC President, Suhail Mohammed Al Mazrouei, stated “if it doesn’t work we always have the option to hold an extraordinary OPEC meeting and we have done so in the past”. This may be too little too late for the loonie after it continually cracked fresh lows against the dollar last week but has started this morning on the front foot as markets wind down for Christmas.