NAFTA and Brexit in the spotlight, Trump may come up with new sanctions

Summary:

• Canadian foreign minister signals a breakthrough in tense trade negotiations with the US

• The UK and the EU gear up for a special summit to sign a Brexit deal in November, May faces another backlash

• Donald Trump could authorize sanctions on foreigners meddling in US elections

NAFTA talks were expected to be concluded already two weeks ago but then something went wrong and as a result protracted uncertainty did not subside at all. However, there are new hopes that a deal between Canada and the US will be struck relatively soon. These conclusions might be drawn from latest remarks from Canadian foreign minister Chrystia Freeland who announced a breakthrough in tense talks with its neighbor on Tuesday. She admitted that a new deal was now “imminently possible” reigniting hopes that any NAFTA-related risks could be soon set aside. Recall that Donald Trump also hailed at the beginning of this week the progress made in talks. As a result, the Canadian dollar gained substantially yesterday making a 100 pips profit against the US dollar. In addition, it was also boosted by the API release producing a surprisingly huge crude inventories draw of 8.64 million barrels drop last week. Analysts had expected a much less impressive decrease of 2.7 million barrels. On the other hand, gasoline inventories increased 2.12 million barrels while distillate stocks were also up by 5.82 million barrels. Note that oil prices have also benefited from the Florence hurricane threatening East Coast gasoline supplies. Nevertheless, a route where the hurricane is going to move is unlikely to devastate oil facilities therefore any effects on oil prices should be temporary. WTI prices are up 0.9% and Brent prices are gaining 0.4% as of 6:40 am BST.

The Canadian dollar gained momentum yesterday but it was unable to move through its crucial support. Thus, today’s session could be important and once the pair closes below 1.3075 it could enable itself to continue falling in the days ahead. Source: xStation5

Moving on it is worth mentioning the Brexit thread as well which has benefited the pound so far this week. According to European Commission President Jean-Claude Juncker the United Kingdom should not expect EU negotiators to soften demands as they try to conclude a Brexit divorce treaty - his words did not sound reassuringly at all. However, he also reaffirmed an offer of a close future partnership. Meanwhile, UK Prime Minister Theresa May is expected to face another leadership challenge within upcoming days after 50 Tory MPs met on Tuesday to discuss how to remove her. Reports from The Guardian suggest that if she does not dump Chequers then the party will dump her. Note this is not the first time when PM May is facing harsh criticism from a part of her party’s members. The prime reasons behind such behaviour is that she is betraying the vision of a clean break from the EU. On the other hand, there were also revelations that the EU and the UK could hold a special meeting to sign a Brexit deal as soon as November. The meeting date is to be announced within days. The British pound is trading slightly lower this morning despite the splendid labour market report released on Tuesday.

Last but not least, according to three people familiar with the matter Donald Trump is expected to sign an executive order today authorizing sanctions against all foreigners who attempt to interfere in US elections. This step is aimed at addressing concerns raised by US intelligence agencies that Russia could meddle in elections this year as well. Some call this measure as “another tool in the tool kit” aimed at scaring off those who think about disrupting this year’s elections in the US.

It looks that Chinese stocks have finally broken through the lower bound of the consolidation implying a move at least toward 10000 points in the nearest future. Note that Asian stock markets, measured by the MSCI’s index of APAC shares, have already hit their lowest since July last year. Source: xStation5

In the other news:

• Russian energy minister Novak says that the country could add 300 kbpd within 12 months depending on market conditions

• US-Japan trade talks are likely to be held on 21 September

• Jeff Gundlach says the next move for the dollar may be weakening which could bring relief to non-US stocks

• China’s Hang Seng (CHNComp on xStation5) loses 0.7% being the worst performing index in Asia today

• US 10Y yield slightly retreats to 2.97% after crossing 2.98% during the Asian session