09-NOV-2018, FRIDAY

1) Asian Stocks Lower As Fed Stays On Rate Hike Path
2) USD Resumes Uptrend on Fed, CAD at Risk to New NAFTA Uncertainty
3) Crude Oil Prices May Extend Fall as Fed Boosts USD

1) Asian Stocks Lower As Fed Stays On Rate Hike Path

Asian stocks were lower across all the major bourses Friday, with investors reportedly worried that, with the US Midterm elections out of the way, the Trump White House will feel able to be more assertive again in its trade disputes with China. The US Federal Reserve left interest rates alone, as expected. However, it also left the door to further rises wide open, and the markets still think it highly likely that a fourth rise this year will be seen in December. This could lead to more pressure on emerging market economies saddled with high Dollar debt.

The Nikkei 225 was down 0.9% in the middle of the Tokyo afternoon, with Australia’s ASX 200 down 0.4%. The Australian benchmark has bounced quite convincingly from October’s 2018 lows although its latest run higher has yet to convincingly top its most recent significant peak.

Chinese stocks were harder hit, with the Shanghai Composite down 1.2% and the Hang Seng off by more than 2%.The US Dollar was buoyed up initially by the Fed’s tone, with USD/JPY near five-week highs. However, the greenback slipped back a little as the session went on. The Reserve Bank of Australia’s monetary policy statement found central bankers perhaps a little more confident about economic growth despite inflation’s stubborn refusal to pick up.

2) USD Resumes Uptrend on Fed, CAD at Risk to New NAFTA Uncertainty

The US Dollar appreciated against its major counterparts while the S&P 500 declined on November’s FOMC monetary policy announcement as anticipated. Policymakers left rates unchanged, noting that ‘further gradual increases’ are ahead. Upbeat commentary on unemployment, household spending and inflation accompanied the announcement. This also followed October’s aggressive stock market selloff.

While the next hike is anticipated in December, those bets were not fully priced in heading into Thursday’s rate decision. This may have explained why the greenback rallied and Wall Street ended the day mostly in the red. Indeed, US government bond yields rallied following the interest rate announcement, suggesting that the Fed fueled rate hike expectations.

Following the Fed, reports from Reuters crossed the wires that Canada is pushing back amidst efforts from the US to change the new NAFTA trade deal text. According to the source, “some of the stuff they have been putting forward is not at all what we agreed to”. As a result, the Canadian Dollar further depreciated against its major peers as uncertainty once again clouds the USMCA.

3) Crude Oil Prices May Extend Fall as Fed Boosts USD

Crude oil prices were on pace for their longest losing streak on a daily basis since April 2016 at ten consecutive days. The commodity, which is generally priced in US Dollars, extended losses in the aftermath of November’s Fed rate decision which fueled the greenback, thus making oil relatively cheaper. Most of the weakness seen this past week was as a result of record 2018 US production as the country exempted eight nations from Iranian sanctions.

An eleventh day of consecutive losses may be possible in the week ahead should Friday confirm a tenth. This would mean crude oil’s longest consecutive falling spree since at least 1984 which is more than 30 years ago. On a weekly basis, a 5th one would mean its longest drop since 2015. A couple of fundamental themes could result in this but it won’t necessarily be easy.