Articles

Via a Barclays note:

• US credit spreads are likely to widen in the coming six months
• Due to prevailing highly uncertain environment

The background to this is that the spreads have come in over the past two weeks, from extremes after Trump’s April 2 tarif announcements. Since then, Barclays says prospects of trade agreements between the U.S. and China, low corporate bonds supply, and better-than-expected corporate earnings have brought them back in.

But, risks remain:

• related to tariffs
• “We remain cautious and still expect spreads to be wider in the next six months”

This article was written by Eamonn Sheridan at www.forexlive.com.

The early count is favouring Carney, but its way too early.

Betting markets are showing improving odds for Poilievre.

Long evening ahead is the best bet!

If you are eyeing USD/CAD for clues … not much to go on right now:

This article was written by Eamonn Sheridan at www.forexlive.com.

Goldman Sachs note from Sudnay ICYMI

• US tariffs on Chinese imports could put as many as 16 million jobs at
  risk in China
• “If high US-China
  tariffs were to persist and Chinese exports were to fall
  precipitously, labour markets would surely feel the pressure”
• the 16
  million jobs would be involved in the production of exports to the US
  and nearly one-quarter would be in the wholesale and retail
• Goldman Sachs says communication equipment, apparel and chemical products “more
  vulnerable” than other manufactured goods thanks to their “high
  share in US-bound exports from China”

Yesterday we had stimulus efforts being worked on in China:”

• ForexLive Asia-Pacific FX news wrap: China outlines more economic support

This article was written by Eamonn Sheridan at www.forexlive.com.

Bloomberg (gated) with the report, in brief:

• Iran is pitching a “trillion-dollar” investment opportunity to the US amid nuclear talks, aiming to ease sanctions and attract American industries to its energy and nuclear sectors.
• Tehran’s economic struggles have made it more open to cooperation, but corruption and deep mistrust still cloud the negotiations.
• The US insists Iran cannot develop nuclear weapons, keeping the final outcome uncertain.

Bloomberg cite unnamed sources.

If some sort of deal is reached it may prompt further oil supply to market.

This article was written by Eamonn Sheridan at www.forexlive.com.

Wall Street Journal says Trump to soften blow on automotive tariffs:

• preventing duties on foreign-made cars from stacking on top of other tariffs
• easing some levies on foreign parts used to manufacture cars in the US
• “Trump is expected to take the actions ahead of a trip to Michigan for a rally outside Detroit on Tuesday evening, marking 100 days since he took office.”

The Journal is gated. If you can access, link here.

Let’s see if this turns out to be correct or Trump tweets ‘fake noos!!!!’

This article was written by Eamonn Sheridan at www.forexlive.com.

more to come

White House official:

• Trump is expected to soften the impact of his automotive tariffs
• Preventing duties on foreign-made cars from stacking on top of other tariffs Trump has imposed and easing some levies on foreign parts used to manufacture cars in the U.S.
• Those actions are expected tomorrow

These comments basically a repeat of the what the Wall Street Journal reported:

• Wall Street Journal says Trump to soften blow on automotive tariffs

More.

US Commerce SEC:

• Trump building important partnership with domestic automakers and workers;
• Deal rewards domestic manufacturers, supports firms committed to expanding US production

This article was written by Eamonn Sheridan at www.forexlive.com.

Chinese Foreign Minister Wang Yi:

• Concession and retreat will only make the bully more aggressive
• Dialogue can help resolve differences

***

While US officials keep telling us that they are in contact with China over tariffs China is not seemingly responsive.

This article was written by Eamonn Sheridan at www.forexlive.com.

US politics.

“GOP Sen. Rand Paul says he expects to have enough votes in Senate to pass resolution to effectively block Trump’s tarrifs.
But Paul, who expects the vote Wednesday, attacked Speaker Johnson’s move to block such resolutions as “dishonesty.””

Info comes viua CNN politics reporter:

***

The background to this, via Politico:

• The White House warned that Trump will veto a bipartisan Senate resolution that would terminate his sweeping global “Liberation Day” tariffs.
• The statement of administration policy from the Office of Management and Budget, sent to congressional offices Monday, comes ahead of an expected vote this week forced by several Democrats led by Sen. Ron Wyden of Oregon and Republican Sen. Rand Paul of Kentucky.

This article was written by Eamonn Sheridan at www.forexlive.com.

Japan’s leading life insurers are planning to cut their holdings of Japanese government bonds (JGBs) by a combined 1.3 trillion yen ($9.1 billion) in fiscal 2025, marking a shift in strategy amid new capital regulations.

According to their disclosed asset management plans, four of the top 10 insurers intend to reduce their JGB positions during the first half of the fiscal year, which began in April. Notably, Nippon Life Insurance will trim its holdings for the first time since fiscal 2016.

Info comes via Japan’s Nikkei press.

***

ps. Japan is on holiday today, markets are closed.

This article was written by Eamonn Sheridan at www.forexlive.com.

Ray Dalio isn’t mincing words: the world is past the point of avoiding a historic realignment in trade, capital markets, and geopolitics.

In a stark warning, the Bridgewater founder said hopes for a negotiated fix to the U.S.-led tariff battles are “naive.” The shift away from U.S.-centric trade and investment flows is already happening — and it’s happening fast.

“Exporters, importers, producers, and investors are realizing that regardless of what happens with tariffs, reduced interdependence with the U.S. is now a reality that must be planned for,” Dalio wrote. American and Chinese businesses are scrambling to redraw supply chains and investment plans, but the pullback from the U.S. extends well beyond China. Across the world, companies and governments are repositioning themselves for an era of fractured globalization.

The bigger worry: America’s role as the world’s consumer of last resort — and biggest issuer of debt — is looking increasingly unsustainable. Dalio warns that relying on the U.S. to keep buying and borrowing, and trusting that dollar debt will hold its value, is a dangerous assumption. Countries are beginning to plan for a future where the dollar may not be the ultimate safe haven.

Put simply:

• Deglobalization is here.

• Massive trade and capital imbalances are no longer sustainable.

• The U.S. risks being sidelined as new global networks form without it.

Dalio says the signs are everywhere: monetary systems, domestic politics, and international alliances are all buckling under the weight of bad fundamentals. Today’s disruptions, he argues, look a lot like the early stages of previous historical collapses.

There’s still a chance to manage the transition well — but it would require calm, coordinated action that so far has been sorely lacking. Dalio has floated solutions, like his “3-Part, 3-Percent” fiscal plan outlined in his new book How Countries Go Broke: The Big Cycle, but he doubts policymakers will act in time.

“The window for smart planning is closing,” Dalio said. “It’s time for investors and decision-makers to focus on the structural shifts — not just react to daily headlines — if they want to survive what’s coming.”

***

Dalio in a tweet, warns its too late already:

This article was written by Eamonn Sheridan at www.forexlive.com.

The original US tax bill goal date was Memorial Day. US Treas Sec Bessent now says he hopes for July 4.

Bessent met with ‘Big Six’ GOP leaders, including Speaker Mike Johnson and Senate Majority Leader John Thune, at 4 PM to discuss the party-line megabill and the approaching debt ceiling “X-date.”

As for the X date, Bessent says will get a better idea of it by the end of this or next week. No new date set for now.

Trader are looking to Bessent now for more coherent policy signals.

This article was written by Eamonn Sheridan at www.forexlive.com.

Spain PM says to release 3 days worth of Strategic Oil Reserves

This article was written by Eamonn Sheridan at www.forexlive.com.