New trade war rhetoric tanks global stocks

Global stocks tanked after Donald Trump announced that the US would impose additional tariffs on China. The 10% tariff on Chinese goods worth more than $300 billion will go into effect on 1st of September. This means that the US will have tariffs on all goods from China, ranging from the iPhone to toys. To increase pressure on American partners, Trump is expected to make a major announcement on trade with the European Union later today. In the past, the president has complained about the unfair practices of EU countries on the US. 

The US bureau of labor statistics released the employment data for the United States for the month of July. The data showed that the economy added more than 164k jobs, which was in line with expectations. This number was slightly lower than the 193k jobs that were created in June. The unemployment rate remained unchanged at 3.7% while the private non-farm payrolls increased by 148k. Manufacturing payrolls increased by 16k while the participation rate increased to 63%. The average hourly earnings increased by 3.2% while the average weekly hours dropped by 34.3. Meanwhile, the trade deficit declined slightly to $55.2 billion with both exports and imports declining. 

In Europe, data from the United Kingdom showed that the construction PMI increased from 43.1 to 45.3. Italian retail sales increased by an annualized rate of 1.3% while retail sales in the EU increased by 2.6%. In Italy, the industrial production declined by an annualized rate of -1.2%. In Switzerland, the headline CPI increased by 0.3%, which was lower than the consensus estimates of 0.5%. Meanwhile, in Australia, retail sales increased by 0.4% in June. In Canada, the trade surplus increased to C$0.14 billion. In June, the country exported goods worth more than C$50.31 billion and imported goods worth more than C$50.17 billion.

EUR/USD

The EUR/USD pair was little moved today. It is now trading at 1.1082, which is slightly lower than the day’s high of 1.1115 and slightly higher than yesterday’s low of 1.1025. On the hourly chart below, the pair is trading slightly above the 25-day and 50-day moving averages. The 14-day RSI has moved to the neutral level of 43 while the Average True Range (ATR) indicator has jumped. This is a signal of increasing volatility in the market. 

GBP/USD

The GBP/USD pair paused today after declining sharply in the past few days. The pair is trading at 1.2425, which is slightly above the day’s low of 1.2078. The price is also at the lowest level since 2013. On the hourly chart shown below, the pair is slightly below the 25-day and 50-day moving averages. The RSI has moved from a low of 12 to the current 30. The pair could remain in this holding pattern as Trump makes his announcement on doing business with the EU.

GER30

The German Dax index declined by more than 250 points as the trade war rhetoric increased. The index reached a low of €11,872, which was the lowest level since June this year. On the four-hour chart, the pair is slightly below the 38.2% Fibonacci Retracement level. The pair is trading below the 25-day and 50-day moving averages while the RSI has dropped to the oversold level. The index could drop sharply if Trump announces new tariffs on EU goods.