HFM information and reviews
HFM
96%
Octa information and reviews
Octa
94%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%

Blindsided reminder to expect unexpected


6 May 2019

Blindsided reminder to expect the unexpected from Trump’s Twitter feed wakes up period of historic calm in volatility


The period of historic calm across global financial markets is staring at the prospect of a rude awakening after US President Donald Trump unexpectedly raised the stakes in trade talks with China by threatening to increase tariffs even further as early as the end of the coming week.

Risk-off sentiment has been the response to this swerve from Trump, with risk-off mood sweeping across Asian and emerging markets in early Monday trading, following the US President’s tweets about raising existing US tariffs on $200 billion worth of Chinese imports this Friday, while hinting at new tariffs “shortly” on a separate $325 billion worth of Chinese goods.

At the time of writing, the Chinese Yuan has fallen at a pace not seen in over two years, by nearly one percent against the US Dollar while the Australian Dollar has weakened by some 0.6 percent against the Greenback, falling below the psychologically-important 0.70 level.

Stocks in China have dropped by more than five percent after returning from a holiday, while Dow futures point to a drop exceeding 450 points. Commodities are reacting to the news as well, with Brent futures falling by more than two percent as demand for Oil drops, while safe haven assets such as Gold and the Japanese Yen are edging higher by about 0.3 and 0.4 percent respectively as of writing.

While it remains to be seen whether the Trump administration will press ahead with the added tariffs, it’s already evident that markets are taking some risk off the table, undermining the base case that investors had been pricing in: a formalized US-China trade deal in the near future.

With Chinese Vice Premier Liu He scheduled to lead a delegation to Washington this week, the timing of the tweets also suggests that President Trump is attempting to push through an immediate resolution to the drawn-out talks. This latest development once again demonstrates how Trump’s tweets can be a wild card for any attempt to formulate a lasting outlook on global growth, as trade tensions remain a key overhang for markets.

What remains to be seen is whether Trump’s wielding of the tariff hammer at a stage of negotiations where the majority thought a new trade agreement with China was close, could be a ploy to jawbone an immediate resolution to the drawn-out trade talks that have dictated market sentiment for close to a year. This development has also served as a reminder of the threat investors still carry when it comes to being blindsided from a set of completely unexpected tweets.

Should the White House indeed proceed with the added layer of tariffs, this is something investors cannot afford to underestimate as it carries global ramifications. Optimism had only just been picking up on hopes that China’s economy was finding stability and this threat from Trump risks derailing that train in a hurry. Another shot in the arm for global trade tensions also risks crippling global trade even further, which has already encouraged some very strange trade figures from a list of economies in recent months. Ailing demand would prove another thorn in the side for Germany’s ailing manufacturing sector, while the addition of further tariffs would also raise the bar of alarm for shipments from trade-dependent economies. Several economies across Southeast Asia have posted declines for exports since Q4.

It remains to be seen whether the Trump administration will press ahead with the added tariffs, or if China will actually walk away from the negotiating table. What is clear is that investors are already taking risk off the table, as the latest trade developments cloud the global growth outlook for the year.

Share: Tweet this or Share on Facebook


Related

Yen stabilizes as Japan ramps up intervention warning
Yen stabilizes as Japan ramps up intervention warning

Threats of FX intervention help yen to stabilize near three-decade lows. Dollar and stocks take a step back, Bitcoin jumps in anticipation of halving. Shortage of liquidity could be an important market theme this week.

26 Mar 2024

Stocks at fresh records even as dollar bounces back
Stocks at fresh records even as dollar bounces back

Wall Street leads rally in equity markets, fuelled by rate cut optimism. US dollar stages surprise rebound amid US exceptionalism. Pound slides on BoE's dovish tilt, yen steadies, PBOC loosens grip on yuan.

22 Mar 2024

Dollar rises as Fed enters spotlight, yen plummets
Dollar rises as Fed enters spotlight, yen plummets

US dollar gains as traders brace for hawkish Fed. Yen tumbles despite BoJ's historic decision. Loonie slides on cooler than expected Canadian inflation. Wall Street gains ahead of Fed, oil extends advance.

20 Mar 2024

BoJ hikes, scraps yield curve control, but yen slumps

BoJ ends negative rates and yield curve control in historic move, but yen can't catch a break as Ueda signals ongoing accommodative stance.

19 Mar 2024

Dollar recovers, equities stall after US data releases
Dollar recovers, equities stall after US data releases

Dollar stages comeback as US data fuels speculation of fewer Fed cuts. Stocks and Bitcoin take a step back, oil climbs after Ukraine drone attacks. Yen traders play the guessing game ahead of next week's rate decision.

15 Mar 2024

US PPI and retail sales data enter the limelight
US PPI and retail sales data enter the limelight

After hot CPI inflation, dollar awaits PPI and retail sales data. Yen on the back foot as BoJ March hike bets decrease - S&P 500 and Nasdaq pull back, gold rebounds

14 Mar 2024


Forex Forecasts

MultiBank Group information and reviews
MultiBank Group
84%
XM information and reviews
XM
82%
FP Markets information and reviews
FP Markets
81%
FXTM information and reviews
FXTM
80%
AMarkets information and reviews
AMarkets
79%
BlackBull information and reviews
BlackBull
78%

© 2006-2024 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.