Sea of red as Trump plays game of chicken with trade
It was a sea of red in the world stocks market after Trump threatened to implement new tariffs on Chinese goods on Friday. In a tweet, the president said that the tariffs on the $200 billion goods from China will increase. In recent weeks, the president has been emboldened by the economic data that showed the US economy grew in the first quarter. He has also been concerned that the new trade deal will not adequately benefit the US. In response, the Shanghai index declined by 5.5% while US futures pointed to a lower open, with the Dow expected to lose more than 500 points.
The sterling declined today as discontent over Brexit continues. This is after senior leaders of the Labor Party cast doubt on the chances of a cross-party deal. This cooled expectations that the prime minister was nearing an agreement with the opposition party. In an interview, John McDonnel, who serves as the Labor shadow chancellor said that he no longer trusted the prime minister and that she had “blown the confidentiality” of the talks and jeopardized negotiations.
The euro moved up slightly against the USD after better-than-expected economic data from the EU. In the EU, the manufacturing PMI rose to 52.8 from the previous 47.9. The services PMI rose to 52.8, which was higher than the expected 52.5. In Germany, the services PMI increased to 55.7 from the 55.6. In France, the Markit composite PMI improved slightly to 50.1 from the previous 50.
The price of crude oil declined after Trump threatened to increase the tariffs on Chinese exports on Friday. The price of West Texas Intermediate (WTI) declined to an intraday low of $60 but it later pared those losses. Investors believe that tariffs would affect the growth of the global economy, which will affect the demand of oil. The same trend was seen in other commodities like copper, soybeans, and corn.
The XTI/USD pair declined to a low of 60. It then pared some of those gains and rose to an intraday high of 61.60. On the hourly chart, the price is along the 50-day moving average and slightly above the 25-day moving averages. The RSI has risen to above 56 while the volumes indicator has gained. The pair will likely continue the upward momentum to test the 62.50 level.
The EUR/USD pair rose slightly to a high of 1.1203. This price is slightly above the 25-day and 50-day moving averages and along the upper line of the Bollinger Bands. The RSI has remained relatively unchanged above the 50 level. There is a possibility that the pair will continue moving upwards ahead of the US inflation numbers.
After rising sharply earlier today, the GBP/USD pair declined sharply to an intraday low of 1.3090. On the hourly chart the price is slightly above the 50-day moving averages level and slightly below the 25-day moving averages. The RSI has moved from a high of 81 and declined to a low of 46. The price will likely continue to decline, to test the 61.8% Fibonacci Retracement level of 1.3056.