US and Asian equities closed mixed yesterday as concerns about protectionism weighed on market sentiment. While China offered to import an extra $25bio of US commodities and manufactured goods, further developments, in particular with regards to NAFTA negotiations, fueled concerns.
Trade concerns rose last night after US Director of the National Economic Council, Kudlow, reiterated Trump’s preference for splitting NAFTA talks and engaging in bilateral negotiations (Bloomberg).
USD MXN rallied on the back of these headlines to reach highs not seen since February 2017.
The negative sentiment also spread to Brazil where BRL touched a two-year low despite increased intervention by the central bank.
CAD reversed its initial losses overnight, receiving support from reports that US Treasury Secretary Mnuchin urged President Trump to exempt Canada from the Steel and Aluminum tariffs (ABC News).
GBP outperformed in the G10 space yesterday, with GBPUSD rising over 0.6%, mainly supported by better-than-expected services data in May.
EUR was weighed down yesterday after Italy’s PM Conte announced a proposed fiscal expansion program. However, EUR reversed its initial losses and rallied on reports that the ECB may use its meeting on 14th June to communicate when to end its asset purchases programme (Bloomberg).
ECB’s Praet confirmed this morning that next week’s policy meeting will be pivotal.