Markets once again moved in line with Geo-Political influences and more specifically President Trump comments on Friday as he accused China and the European Union of currency manipulation and then threatened tariffs on all Chinese goods. We saw a depreciation on the dollar as the President advised that he felt the dollar was too strong and notably the Cny appreciated after hitting the 6.8000 level with some market observers looking at official smoothing action as the cause of the move.
The G20 reacted to Trump’s comments as expected with France urging the US to “return to reason” and the overall sentiment being that current trade tensions are a very real threat to global growth as leading economies fall out of sync. Treasury Secretary Steve Mnuchin tired his best to undo the aggressive comments from the President reiterating that he respects central bank independence and that he see’s light at the end of the tunnel with regard to trade disputes.
It does feel like we are hearing far too much from the President’s twitter account at the moment and the market is not receiving many of his comments well, but as we are seeing action from the administration, investors are quite rightly positioning themselves accordingly. The threat that US policies pose to global growth is considerable and the market will continue to react to presidential tweets and comments while they are coming thick and fast.
Looking ahead to today’s trading and we’ve seen a relatively calm start to the weeks trading so far, the focus will move to the Japanese markets as Tokyo opens as rumours hit the market that we will see a change in the BoJ’s plans with regard to it’s yield curve policy, futures on the 10-year notes took a significant hit in the New York session on Friday. Its relatively quiet in terms of economic data releases again today and so investors will be once again focussing on the news wires and any fresh developments on trade tensions and Geo-Political influences.