The markets took a turn to the downside yesterday after US President Donald Trump advised that he could look to implement further tariffs up to $200 bio on Chinese imports as early as next week. Global stock indices were down across the board and the dollar strengthened with the Dxy trading back up towards 95.00. Emerging markets currencies once again took the brunt of the action with Turkey and Argentina a big focus for investors. The Argentinian central bank raised rates up to 60% in an effort to stem the run on the currency as the IMF ponders on whether it’s going to step up the pace of emergency fund payouts and the Turkish Lira was hit again as news the Deputy Governor of the central bank may be set to resign hit the market.
Investor focus will remain on the global trade issue as we move into the weekend, President Trumps latest announcement is being felt around the world and there’s no doubt that China will look to reciprocate with action aimed back at the US. One school of thought is that we’ll see even more protectionist rhetoric from the US administration as we move closer to the mid-term elections. As the numbers become bigger and bigger, the market is concerned that that there could be a snowball effect across the globe and at the moment emerging market countries seem to be the most at risk. Currency traders will be closely monitoring the EM space as we move through the days trading sessions hoping that we don’t see the moves in Turkish Lira and Argentinian Peso spilling over to the rest of the market.
It’s another quiet day in terms of fundamental data releases today so investors will once again be closely monitoring the news wires for the next salvo in the growing trade war between the US and China. We’ll see continued focus on the discussions between Canada and the US in Washington with regard to Nafta and sterling traders will look for any fresh news on the improving Brexit situation.