MARKETS FALL AS TRUMP THREATENS $200 BILLION CHINESE TARIFFS

World stocks fell today after Bloomberg released its interview with the US president. In the interview, he said that the US was ready to impose tariffs on $200 billion worth of Chinese goods. This comes after the failed meetings between the US and Chinese government officials a week ago. He also called the EU offer on removing auto tariffs ‘not good enough’ and threatened to impose tariffs on European cars. The biggest news from the interview was that he was prepared to remove the US from the World Trade Organization (WTO). This would be the biggest assault on global trade from the US. It would also leave the US isolated and without a clear conflict resolution mechanism on trade issues.

The European Union inflation slowed in August according to a report by Eurostat. The report showed that inflation rose by 2.0%, which was lower than the 2.1% growth in July. Traders were expecting the consumer prices to remain unchanged. The core CPI numbers rose by 1.0%, which was lower than the expected 1.1%. The disappointing numbers are unlikely to change the ECB’s plan on monetary policy. The bank has guided that it will wind down the quantitative easing program in December this year. They also plan to start normalizing interest rates in September next year. There are concerns about the preparedness of the ECB and other major central banks in case of a financial crisis. With their rates very low, the banks would not have the tools in place to take care of the crisis.

The Japanese Yen fell against the dollar even after disappointing industrial production numbers. The output from Japanese factories fell 0.1% from a month earlier. This was worse than the expected 0.2% gain and was the third straight month of declines. This drop was attributed to the lower production of transport equipment, machinery, and steel and iron products. An increase was noted in the production of chemicals, electronic devices, and ICT components. The government’s statistics office said that production, shipment, and inventories were starting to rise. The unemployment rate rose by 0.1% to 2.5% in July.

USD/JPY

The USD/JPY pair fell today and reached an intraday low of 110.70. Month-to-date, the pair has fallen by 0.92%. The MACD shows that the pair is crossing the neutral level of zero as the pair trades below the 25 and 50-day moving averages. The likely scenario is where the pair continues moving lower to test the important support of 110.35.

EUR/USD

In the past few days, the EUR/USD pair has traded within a narrow range of 1.1640 and 1.1735. It ends the month having recovered from the sharp decline experienced early in the month. It is now trading at 1.1660, which is between the range formed recently. This level is also in line with the 50 and 25-day Exponential Moving Average. As a new month starts, bullish traders should wait for a break-out above the 1.1735 level while bearish traders should wait for it to fall below the support of 1.1640.

XAU/USD

Gold halted the sharp decline when it reached a low of $1160. The gains this month have made it recover from a YTD slump of 10.95%. The XAU/USD pair is now trading at 1205, which is slightly lower than the monthly high of 1220. The recent gains have been attributed to a weaker dollar. The current price is along an important support as shown below. It is also slightly higher than the 50 and 100-day EMA. The MACD is slightly above the neutral level. As the month starts, traders should wait and see before making bullish and bearish trades.