Global stocks fall as Trump restarts his trade war with China
US stocks declined sharply after Donald Trump announced new tariffs on Chinese goods worth more than $300 billion. The announcement escalated the trade war between Washington and Beijing. The new announcement came shortly after the President met with Robert Lighthizer and Steve Mnuchin, who were in Beijing this week. In a statement, the Trump suggested that the negotiations had gone badly, with China failing to follow through on its pledge to buy more farm products and to restrict the flow of fentanyl. The new tariffs will affect everything from diapers to iPhones and will go into effect on September 1.
The Australian dollar dropped sharply after Donald Trump announced the new tariff threat. This is mainly because of the significant role the Chinese economy plays in Australia. Two-thirds of Australian goods like iron ore are exported to the country. Earlier today, the country released the retail sales data. In June, retail sales increased by 0.4%, which was better than the expected 0.3%. In the second quarter, retail sales increased by 0.2%, which was slightly lower than the consensus estimate of 0.3%. In the quarter, the PPI increased by 2.0%, which was better than the expected 1.9%.
Later today, the market will receive CPI data from Switzerland. The CPI is expected to increase by a YoY rate of 0.5%, which will be slightly lower than the previous 0.6%. From the UK, the market will receive the construction PMI data, which is expected to show an increase of 46.0 from the previous 43.1. From the European Union, retail sales are expected to increase by 1.3% while the PPI is expected to increase by 0.8%.
From the US, the Bureau of Labor Statistics (BLS) will release employment data. In July, data is expected to show that the economy created more than 164k jobs. The unemployment rate is expected to remain unchanged at 3.7% while the participation rate is expected to remain unchanged at 62.9%. The average hourly earnings are expected to remain unchanged at 3.1%.
The EUR/USD pair rose in overnight trading after Donald Trump announced the new tariffs on Chinese goods. The pair rose from a low of 1.1025 to a high of 1.1095. On the four-hour chart, this price is slightly below the 25-day and 50-day moving averages. The RSI has moved from the oversold level to the current 40. The Average True Range, which is used as a measure of volatility has risen sharply. Therefore, the pair could continue moving higher as investors think about the impact of the escalated trade war and US jobs data.
The AUD/USD pair declined sharply to a low of 0.6975. This was the lowest level in a number of months. On the hourly chart, the pair is trading below the 25-day and 50-day moving averages while the RSI has remained slightly above the oversold level. The money flow index has also remained above the oversold level. Today, the pair will likely continue being more volatile as investors focus on the trade war concerns and US jobs numbers.
On Wednesday, the USD/JPY pair rose to a high of 109.30. In the past 24 hours, the pair has dropped sharply to a low of 106.85 in reaction to the Fed and tariff announcements. The pair is now trading at 107.00, which is the lowest level since June 25. On the chart below, this price is below the 21-day and 42-day moving averages. It is also trading at the oversold level of 20. The pair will likely continue moving lower as global tensions rise.