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US-China Trade War Fears Return as Risk Sensitive Currencies Slump

Pound News: Sterling Edges Away from Last Week’s Lows on Brexit Speculation

Last week saw investors sell the Pound en masse as markets began to doubt that cross-party Brexit talks would lead to a deal being reached, and as uncertainties of upcoming EU elections worsened.

Sterling’s slump appears to have stopped for now though, as yesterday saw the British currency rebound slightly from its weekend lows.

Britain’s only notable data for the week will be published today in the form of job market data from March. Due to the focus on Brexit and UK politics, however, these are unlikely to have a major impact on Sterling.

 

Euro News: Rival Weakness Leaves Shared Currency Resilient

Due to a lack of a major Eurozone news yesterday, the Euro was driven more by movement in the US Dollar than by intrinsic factors. The US Dollar is the Euro’s biggest rival and the two currencies share a negative correlation.

The Euro was briefly weaker earlier in the session due to US Dollar strength, but as US-China trade jitters hit the US Dollar more in the afternoon the Euro became a little stronger and avoided major losses versus the Pound.

Uncertainty about Germany’s economic outlook means German data is in focus this week, so today’s inflation and economic sentiment stats could prove influential. Eurozone industrial production and economic sentiment may influence Euro movement as well.

 

US Dollar News: Chinese Trade Retaliation Hits USD Appeal

Demand for the US Dollar started off the week quite strongly. Following a poor performance last week, investors bought the US Dollar back from its lows on profit-taking and safe haven demand.

However, the US Dollar’s appeal as a safe haven didn’t help it to perform strongly throughout the day. Investors sold the US Dollar again during the American session as China announced fresh retaliation to last week’s US trade tariffs, which worsened concerns about how the US economy could be impacted.

Trade will remain in focus for US Dollar investors. Any developments in US-China trade negotiations, as well as this afternoon’s import and export prices data, could influence USD movement today.

 

Canadian Dollar News: CAD Losses Limited despite Surge in US-China Trade Jitters

As an export-heavy nation with a current account deficit, Canada’s economy is sensitive to major shifts in global trade. As a result, the Canadian Dollar slumped yesterday as US-China trade tensions continued to worsen.

Still, compared to other trade-correlated currencies like the Australian Dollar, the Canadian Dollar’s losses were fairly limited. This is because prices of oil, Canada’s most lucrative commodity, rose sharply throughout the day.

Canada’s new motor vehicle sales stats will be published today, but Canadian Dollar movement is more likely to be driven by US-China trade news and anticipation over tomorrow’s inflation rate report.

 

Australian Dollar News: US-China Trade Tensions Leave AUD Unappealing

The Australian Dollar was one of yesterday’s worst-performing major currencies, as a combination of factors made it particularly sensitive to the latest escalations in US-China trade tensions.

China is Australia’s biggest trade partner, and AUD is often used as a proxy for Chinese economic sentiment. On top of this, the Australian Dollar has recently avoided losses on hopes that the Reserve Bank of Australia (RBA) will avoid taking a more dovish tone on monetary policy.

US-China trade developments will remain the primary cause of Australian Dollar movement today, but continued reaction to this morning’s business confidence data may be influential as well.

 

Upcoming Data

 

Tuesday, 14th May

02:30    Australian NAB Business Confidence

07:00    German Inflation Rate

09:30    UK Job Market Report

10:00    Eurozone Industrial Production

10:00    ZEW German and Eurozone Economic Sentiment

13:30    US Import and Export Prices

 

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To keep up to date with the Euro, visit the Euro blog in our Currency News section.

 

Adam Wiffen

Senior Currency Broker

aww@fcgworld.co.uk

 

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