Financial market research and analysis

The dollar experienced one of its worst days this year on Friday after a string of Trump-related news hit demand for the greenback. A combination of Trump breaking with tradition by expressing his displeasure at the Fed raising rates, the President threatening further tariffs on $500 billion worth of Chinese imports and reports about Trump's personal life was sufficient to send the dollar 0.7% lower versus a basket of currencies.

The dollar resumed its path southwards as the new week kicks off, following the G20 summit of finance ministers and central bank governors, in Buenos Aires over the weekend. The summit laid bare the division in global trade relations and highlighted concerns that increasing trade tensions will undermine the global economy; however, no progress was made towards diffusing the situation.

 

Pound remains vulnerable to Brexit headlines

The weaker dollar was just the tonic that the pound needed after diminishing hopes of a BoE rate rise smashed sterling early last week. Brexit remains a problem for the pound and with a quiet UK economic calendar this week, sterling will be particularly vulnerable to Brexit headlines. Theresa May will be very keen for the six-week summer break to start mid-way through this week, especially as polls over the weekend highlighted just how unpopular her Brexit plan was and how unpopular she has become. As Theresa May struggles to cling to power, another blow by the EU that they are not willing to accept her financial services Brexit plan, has done little to help her cause. A no deal Brexit is looking increasingly likely as May faces trouble from every angle.

Whilst the pound traded higher versus the dollar overnight, that was a dollar weakness story. The pound has moved lower versus the euro during the Asian session.

 

Trade jitters weigh on equities

Wall Street ended a rather lacklustre session flat on Friday, with all 3 main indices ending less than 0.1% lower. No progress at the G20 over trade issues means trade jitters are being sent through the markets. Asian equity markets dropped lower as traders took risk off the table, whilst flows into safe-haven assets were once again on the increase. Safe haven Japanese yen was seen extending Friday’s 0.9% gain versus the dollar, whilst gold followed a similar pattern. European futures are also pointing to a lower start after the opening bell.

 

EU trade mission to Washington to ease tensions?

Trade issues are likely to stay in focus as an EU trade mission is due to arrive in Washington mid-week. Any signs that Trump is willing to back down from his hard-line stance with the EU could quickly boost sentiment leaving traders the opportunity to focus on the ECB meeting and US GDP release at the end of the week.


The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. Losses can exceed deposits.