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World markets react to escalating trade war fears

Published: Tuesday 19 June 2018

  • Australian Dollar twitches on poor housing index
  • European Central Bank (ECB) President’s speech this morning’s highlight
  • US building and housing data awaited
​​By David Johnson

World markets react to escalating trade war fears

Monday was a lacklustre day as far as market data is concerned. Oh, and there was a football match and that went OK for England I hear but that happened after the markets in the UK had shut.
Ripples of uncertainty swept through the foreign exchange and stock markets as investors reacted to Trump’s Administration escalation of a trade war with China. President Trump has directed his treasury to look into additional tariffs of 10% on $200bn of Chinese goods as “China apparently has no intention of changing its unfair practices." This escalation of rhetoric leads to a deterioration of investor sentiment, as it fuels the fears of stagnation and slowdown in the global economy. Some economists now fear that the toxic mix of protectionist fiscal policy, coupled with hawkish monetary policy could tip the US into a recession.

Australian Dollar drops on central bank news

The AUD reacted negatively to the Reserve Bank of Australia’s (RBA) minutes which surprised, as it revealed the Central Bank no longer predicts the next rate move was going to be an increase to the interest rate. Back in the April and May meeting minutes, the Central Bank noted that “in the current circumstances, members agreed that it was more likely that the next move in the cash rate would be up, rather than down.” But, such reference is taken out from the June minutes.
Brexit defeat in House of Lords

The UK government has been defeated in a landslide Lords vote, this will now set up another Commons showdown over an amendment to give MPs a “meaningful vote” even if the government fails to reach a Brexit deal.
More interesting news from European Central Bank today?

Other than a speech from the Head of the European Central Bank (ECB) there is nothing of note due this morning. Mario Draghi has just announced a cessation of the ECB’s Quantitative Easing (QE) programme by the end of the year, so he may have something interesting to say on that.

US Dollar could get even stronger

Then we are twiddling our thumbs until US building and housing market data is released this afternoon. A bounce-back in housing starts is forecast, so the US Dollar, which is already uber-strong, could strengthen a little more.

Volatility ahead for New Zealand Dollar 

Overnight tonight we will get a couple of interesting data releases from New Zealand. The Dairy Trade Price Index is very significant for the New Zealand economy, because dairy production is such a large part of New Zealand’s Gross Domestic Product (GDP). The other important data item expected is Consumer Sentiment, which is struggling to get back to the peaks we saw in early 2017. A bit of New Zealand Dollar volatility seems assured. A good night for automated orders, methinks. Get in touch to set yours up.

What do you call a boat with a hole in the bottom?
A sink.

What kind of music do mummies listen to?
Wrap music.

Why did the cookie go to the doctors?
Because he felt crummy.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:00 EU: Current Account 32.0b 30.3b
USD 13:30 US: Building Permits 1.36m 1.35m
USD 13:30 US: Housing Starts 1.29m 1.31m
NZD 23:45 New Zealand: Current Account -2.77b 0.05b

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