The markets are witnessing an escalation of the trade conflict between China and the United States
After Friday, D. Trump threatened China that it is necessary to expect the expansion of trade duties on imported goods to $ 300 billion. In response, the authorities “under heaven” once again lowered the yuan’s rate against the US currency and reported that they are considering a variant of new stimulus measures for the national economy.
In fact, observing what is happening in the trade relations between the states and the PRC, one can speak about the escalation of the conflict, which manifests itself in ever new measures of the economic opponents’ impact on each other. Assessing this state of affairs, we believe that the current nervous situation in the markets will continue. And it can last indefinitely, while the competing parties do not take real steps and find points of reconciliation. But, considering the view of President D. Trump on the US’s place in the world both from a political point of view and from an economic point of view, one does not yet have to hope for it. Most likely, he will first try to implement all the methods of pressure and only then will go to the world and will seek common ground when it becomes clear that the trade war is economically damaging, that the negative of this confrontation is greater than the positive.
Today there is a lull in the foreign exchange market. Bidders, on the one hand, are waiting for the development of events in the confrontation between Washington and Beijing, and on the other, they await the outcome of the ECB meeting. The market is interested in how the European regulator will react to the latest developments. In our opinion, it is likely that the bank will not only signal the commitment of its position, declared at the previous meeting in June, but also express new fears about the escalation of tension between the US and China. If this happens, it means that it will be possible to expect the current CBR rate to remain for a considerable period of time, which could have a negative impact on the dynamics of the single currency.
On Tuesday, the Russian ruble was under strong pressure amid news that the US Senate is considering the possibility of tightening sanctions against the Russian Federation, including state debt. But today the ruble gets support, despite the continuation of the growth in OFZ yield, due to the increase in the cost of crude oil.
In summary, we note that the world economy enters a new, more acute phase of the struggle between the United States and China, which can damage its growth. In this case, we expect growth in demand for the dollar as a safe haven currency.
Forecast of the day:
The currency pair EUR / USD is trading above 1.1670 in anticipation of the outcome of the negotiations between the US and EU on customs duties to be held today. If they do not lead to positive arrangements, the pair can break through the level of 1.1670 and fall to 1.1585.
The GBP / USD currency pair is trading above the 1.3135 mark, the intersection of which from top to bottom will lead to its fall to 1.3075. This will happen if the euro / dollar pair turns down.