Yesterday was a confusing day for the US dollar. The greenback surged 0.69% against its G10 counterparts as measured by the broad DXY Index, despite the “transcript”, which was actually compiled from notes and recollections and is not a verbatim transcript, explicitly showing President Trump asked Ukranian President Zelensky, or “Zelenskyy” as per the “transcript”, to look into Joe Biden’s affairs. The release sent the US dollar higher as treasury yields rose and equities sold off. The greenback’s strength was given further support by Trump’s statement saying a trade deal with China is getting “closer and closer” and there is a “good chance” it will get done. A brightening trade climate boosted the dollar and distracted media from the “transcript”. In other news, the New York Fed has decided to increase its liquidity provisions this week by increasing its overnight repo offering from $75bn to $100bn and its two-week offering today from $30bn to $60bn.


Sterling shed 1.14% against the dollar yesterday as Boris Johnson flew back for Parliament’s opening day. Optimism after the Supreme Court ruling was quickly slashed as all possibilities remain on the table. After a raucous session in the afternoon as Attorney General Geoffrey Cox faced questions, the temperature only rose. Johnson tried to gaud opposition parties to support the Fixed Term Parliament act and trigger a general election with a 2/3rd majority, but Labour stood defiant in its stance that a no-deal exit would need to be categorically removed first. Johnson, no stranger to breaking the law, shrugged this off and stated that the UK will leave the EU on October 31st despite the Benn law which states an extension must be requested if there isn’t a deal in place by October 19th. The fun didn’t stop there, however. Johnson’s use of inflammatory language such as the repeated use of the phrase “surrender act” – of which he repeated 15 times in total – caused backlash from MPs who are fearing for their personal safety. The scene is set for another tumultuous day in Westminster. Opposition leader Jeremy Corbyn requested speaker John Bercow to convene all party leaders to make a joint statement condemning abusive language, to which Bercow was open to the idea. It is possible Johnson will be back as soon as lunchtime following his address to the Tory backbench 1922 committee at 11:30 BST. On today’s agenda, Johnson will try to pass a motion for a three-day recess to allow time for the Conservative party conference next week, while the possibility of a short prorogation and a one-line bill that fixes an election date (which would only need a simple majority) are on the table. Sterling has traded flat in this morning’s session.


Trade comes back to bite the euro today as news hit the wires yesterday that the US could levy tariffs on up to $8bn worth of EU goods following the WTO ruling on illegal subsidies to Airbus. The US stated it is deciding on whether to use “rotational tariffs” in order to increase uncertainty in the Eurozone economy. By rotating the goods in which tariffs are levied, the damage a measly $8bn of tariffs will do increases as it casts greater uncertainty on Europe’s supply chains and export market. The tariffs could come in as early as October after the confidential WTO ruling is released on September 30th. Headlines yesterday also stated the EU may try and get ahead of this by imposing a proactive $4bn tariff on US goods to “take the trade fight to trump”. The single currency fell 0.7% yesterday, and its trading remains tentative this morning.


The loonie was out of the spotlight yesterday, as the constitutional norms of the US and UK groaned under pressure and crude oil prices reached a fresh low for the week before recovering slightly overnight. US trade official Richard Neal said that the impeachment of Donald Trump will not affect his work on drug and price talks for the USMCA agreement.



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