27.09 - new currency under US hit
USA are going to shift their focus onto the new ‘rival’.
Forget about China. It seems that Donald Trump has found a new ‘rival’ for the American well-being. And it is an unusual one. This time Canada came under fire. Yesterday president Trump stated that he refused to meet with Canadian Prime Minister Justin Trudeau as the United States were really dissatisfied with Canadian negotiation style. Although these claims were quickly put to rest by a spokeswoman of Trudeau who said that the meeting with Trump was never really requested in the first place.
But a very alarming this is that the countries have already gone further than simple threats. Canada has already slapped American dairy products with tariffs and Trump came really close to subjecting Canada’s automobiles to tariffs.
The main problem between the two countries is NAFTA negotiations. Trump stated that there might be no NAFTA deal with Canada after all and that it is possible that the deal is going to be only between United States and Mexico. And while we can withstand that, one more trade war would be too much for the world’s economy.
Yes, we believe that both American and Canadian economies are strong enough to live through the rivalry, but at this point this not so much about two economies of the world, but about economic balance of the world as a whole. And we can clearly see what can happen of Canadian economy – the same thing that is happening to Chinese right now, possibly even worse, as Chinese economy is the second strongest economy in the world after all.
Also we can clearly see what is going to happen to dollar. And although greenback is up today, it is only because its strength was reassured by Fed meeting, where it was said that US economy is strong enough to withstand one more rate hike. But in case Trump goes all the way through with Canadian conflict, there will be hell to pay. And who is going to suffer most from the turbulence? Of course us – the traders.
We already have to deal with weakened yuan and instable dollar. USD is the most popular trading asset in the world after all and we cannot abandon it altogether. But in case things get really bad we will simply have to.
Plus, devastating effect of Trump’s statements was already felt by Canadian dollar, as soon as he spoke of subjecting to tariffs incoming into America Canadian cars, Canadian dollar fell. That is a general reaction of the currencies towards tariffs and sanctions nowadays. But for us as traders that is bad news.
Markets are not ready to lose faith in another asset. That could lead to crashing and bring financial crisis closer to us.
Have you ever thought of how much Russian economy was damaged over the years? Endless sanctions from EU and United States have been pouring down on the country, bringing hit after hit. And yes, although the Russians have already eaten through several stabilization funds it seems that ruble is far away from crushing, even though it seems extremely weak. So, what is saving the Russian currency?
We would say that the main point here is to look for the positive outlook of Russian people of the economic situation in the country. They dint really care about the rest of the world and are prepared to do whatever it takes in order to make their country stable and great. And although all of that is just an outcome of the propaganda machine, it works for ruble and so it works for us as well.
For example, finance Minister of Russian said that he doesn’t really believe that new package of American sanctions, if imposed, will do absolutely no harm to Russian economy. And even though there is a real threat of another package of sanctions, ruble didn’t lose any points. On the contrary, Russian currency went up against dollar. All due to the fact that faith in ruble didn’t fade away on investors with Minister’s statement.
Of course, growth of Ruble that has been ongoing for several days now is also due to the fact that Brent went up and breached $80 per barrel point, which is the best price of the crude since 2014. But even though oil experienced losses yesterday, positive outlook wasn’t lost on the currency. What does it say to us? That right now ruble is a valid trading asset. And while there is growth in Brent, there is going to be growth in ruble as well.
And you know what is the most interesting part? That it is quite possible that oil is going to come back to the level of 2012-2013 of $100 per barrel. Imagine national growth of Russian currency then. With oil growing we would say there are high chances for national positive outlook to skyrocket as well. Well, that would just support ruble like nothing else.
Is it time to get into ruble trading? Not yet. We are going to watch Brent for a little more.
- by Anna K.