Oil N' Gold - Resources for Serious Traders
Oil N' Gold Focus Reports
Trump Imposes Metal Tariffs but Some Countries Exempted. ECB Removed Easing Bias Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Fri Mar 09 18 00:40 ET

US President Donald Trump formally signed orders to impose tariff on steel and aluminium imports. Financial markets, however, strengthened as several countries, including Canada and Mexico, and Australia, US military partner and one of the few countries that US is running trade surplus with, are exempted. Asian equities firmed, carrying forward the upbeat sentiment of Wall Street. The DJIA and S&P 500 indices gained +0.38% and +0.45% respectively. Treasury yields changed little. In the FX market, US dollar firmed against major currencies but pulled back a bit against Canadian dollar on relief trade. The DXY index ended the day +0.6% higher. GDPUSD fell -0.68% on Brexit deadlock while EURUSD dropped -0.6% although ECB removed easing bias in its forward guidance. Energy prices remained under pressure with the front-month WTI crude oil and Brent contracts losing -1.68% and -1.13% respectively.

Trump has confirmed the controversial decision of imposing 25% tariffs on steel and 10% on aluminium imported to the US , in an attempt to end US suffering from "unfair trade" and to boost US industry. The US also pledged that the move is for defense of national security which is in compliance with WTO's rules. The tariffs will go into effect in 15 days but Canada, Mexico and Australia are exempted. While former two countries are under NAFTA renegotiations with the US, the latter is US close military partner. More importantly, the US is enjoying trade surplus with Australia. Most countries condemned the move and threatened retaliation. EU Trade Commissioner Cecilia Malmstroem indicated that the bloc should be excluded from the tariff due to its close alliance with the US, while French Finance Minister Bruno Le Maire warned of the lose-lose consequence of trade war. The UK pledged that it would work with EU partners to consider "the scope for exemptions" while "robustly" supporting UK industries.

ECB dropped the easing bias in the forward guidance. Removal of the language , "if the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, we stand ready to increase the asset purchase programme (APP) in terms of size and/or duration, suggested less stimulus going forward. Yet, President Mario Draghi reinforced that the act was "substantially backward looking" and "without signals or implications for either our expectations or our reaction function". He emphasized that "key ECB interest rates to remain at their present levels for an extended period of time and well past the horizon of our net asset purchases". Meanwhile, ECB retained the guidance that the asset purchase program, running at 30B euro per month, would continued "until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim". Policymakers were confident that "Incoming information, including our new staff projections, confirms the strong and broad-based growth momentum". They forecast the economy "to expand in the near term at a somewhat faster pace than previously expected". While Inflation, in particular core inflation, remained subdued, the members were confident that the robust growth outlook suggested that inflation would "converge towards our inflation aim of below, but close to, 2% over the medium term". Some more time might be needed for core inflation "show convincing signs of a sustained upward trend". While the risks remained broadly balanced, ECB explicitly indicated the negative impacts of protectionism noting that "downside risks continue to relate primarily to global factors, including rising protectionism and developments in foreign exchange and other financial markets".

Released earlier today, China's CPI accelerated to +2.9% y/y in February, beating expectation of +2.4%, from +1.5% a month ago. PPI eased to +3.7% from January's +4.3%. The market had anticipated a milder slowdown to+3.8%. For the day ahead, the focus is on US employment report. Number of nonfarm payrolls probably increased +205K in February, up form +200K a month ago. the unemployment rate might have slipped to 4% from 4.1% in January. Average housing earnings might have increased +0.2% m/m, down from +0.3% in January.


Latest Analysis from this Author