Stocks plunged on Friday after President Donald Trump ordered U.S. manufacturers to find alternatives to their operations in China while later also stating at the G-7 summit that he regrets not raising tariffs on Chinese imports even more. Friday's escalation in the trade war between US and China pushed risk markets lower causing equities to drop swiftly but we may see mild recoveries on the weekly opening after China's Vice President stated that he is willing to solve the trade dispute with the US amicably.
Meanwhile, the Chinese yuan hit an 11-year low this morning as the U.S.-China trade war escalated dampening the global economic outlook. Personally, I would not expect the situation to turn around anytime soon between the US and China and in between recoveries look like possibilities to re-enter markets on the short side with a fair risk/reward ratio.
Sino/US Dispute Overwhelms the Markets
The G7 over the weekend was overshadowed by the trade war and Donald Trump will give a speech about it this afternoon which should be eyed closely by traders. At the G7 meeting, Trump also caused unease when he demanded at the G7 summit dinner that the group readmit Russia in their midst
Forex Preview: USD Shaken by Trump
The USD lost on Friday but reassurances from various Fed sources show the Fed will likely stay on course and not blindly lower rates which should give the USD a reason to recover again, also given that no big technical levels were broken. The EUR naturally gained on the back of the newfound USD weakness but is still below important levels and could turn south again from here as it did in July Elsewhere, the GBP is gaining on both USD weakness and a little bit of hope of a possible resolution about the backstop issue between the UK and the EU. I would not bet on this to work out either, however, given that Brexit talks have failed on numerous attempts before.
Oil Dips, gold Gains
Oil prices fell this morning, pushing U.S. crude to its lowest in more than two weeks, it will be interesting to see what happens after Donald Trump's speech and if he will mention Iran's Zarif surprise visit at the G7 or any impact of that. Meanwhile, safe havens jumped with XAU/USD touching a fresh six-year high on Monday as the announcement of fresh U.S. tariffs on China imports caused investors to turn to safe-haven assets.
Bitcoin Higher
BTC also traded higher as an increasing number of market participants view crypto alternatives as a form of safe havens but was not able to get anywhere close to the 11k level which keeps it in neutral territory.
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EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.