Currencies undeterred by renewed trade tension, UK & Eurozone data in focus…
China’s retaliation yesterday to impose tariffs on $60 billion of US imports may have rocked stock markets but the reaction in currency markets was muted.
The ramp-up in tension between the US and China is a becoming ever more apparent. The latest move from China sent global stock markets spiralling down yesterday, to the tune of 2.5%+. While stocks sank, typically impacted currencies, such as the Aussie and Kiwi dollars, remained surprisingly resilient. The currency which has reacted significantly to the recent escalation has been the Japanese yen, which has seen considerable inflows due to the enhanced risk-off environment. The US dollar has seen a mild level of support due to its reserve status but nothing like what has been seen in the past. Markets remain on edge, awaiting the next headline.
Today sees focus on UK and Eurozone data. From the UK’s perspective, we’ll have another set of labour market data to observe. UK employment has gone from strength to strength over the last few years, with the most recent unemployment level printing at 3.9%. Whilst unemployment has decreased, wages have risen which has been a good sign for the Bank of England. Today’s report is once again anticipated to be strong with no cracks expected to appear in the jobs market. From the Eurozone, a key German sentiment index is scheduled for release which should have the euro on its toes. Germany has been one of the weaker Eurozone economies of late, following a number of very strong years. Manufacturing, which plays a significant role in the country’s economic make-up, has taken a big hit over the last 6 months. Today’s business sentiment report is expected to alleviate some of the concern but should still provide reason to remain cautious.
Written by Viv Savani. 8:43am, May 14th 2019
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