Market Review - Fundamental Perspective - 01 June 2018

Global equities came under renewed pressure yesterday after the US announced tariffs on aluminum and steel imports from its largest trading partners. In FX, the flight in safe haven JPY was limited however, given the US measures were broadly expected
After US Secretary of Commerce Ross announced tariffs on aluminum and steel imports on the EU, Canada and Mexico to be effective from 1st June, all partners announced they will retaliate
The macroeconomic implication of these retaliating tariffs should be very limited overall, but an escalating tit for tat trade war could derail global growth
Mexico’s Guajardo commented that this makes a NAFTA deal before July’s election difficult (Reuters), and both MXN and CAD dropped versus the USD as a result of the headlines
In Italy, the populist parties M5S and Lega agreed on the formation of a new government, and President Mattarella approved the cabinet with Professor Conte as prime minister. This should bring some relief to Italian assets and the EUR as it likely decreases chances for a radical agenda
Our traders currently see EURUSD support at 1.1640 ahead of 1.1590, while resistance lies at 1.1730 ahead 1.1830
In contrast, Spain may be headed towards snap elections, and Parliament will vote on the no-confidence motion registered by the socialist party (PSOE) against the conservative PM Rajoy, which looks likely to pass

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