Stock markets plunge as US/China tensions overheat, FX remains relatively calm…
Monday was a hugely volatile day across financial markets with the stock market bearing the brunt of an escalation in US/Chinese trade tensions.
Markets began to spiral lower after the Chinese allowed the USDCNH (US dollar vs. Chinese yuan) pair to rise above the 7.00 level, a price which had previous been defended by the PBOC (People’s Bank of China) and a resistance level which had remained intact for over 11 years. The move above 7.00 pushed the US treasury to label the Chinese government as currency manipulators. Stock markets across Europe and the US were down almost 5%, creating widespread panic. Currencies saw the usual reaction – the Japanese yen and Swiss franc were the most sought after currencies with the euro not too far behind. The pound remained stable against the US dollar but closed nearly 1% down against the euro.
Yesterday’s UK services PMI surprised to the upside, printing at 51.4 vs. forecasts of 50.4. The improvement failed to spark a relief rally in the beleaguered currency. Markets are still awaiting for developments on the Brexit front before making any moves. The next short-term challenge arrives on Friday in the form of Q2 GDP.
Today is a quiet one for economic data – it’s highly likely focus remains around the ongoing economic aggression between the US and China.
Written by Viv Savani. 8:39am, August 6th 2019
The details expressed in this market report are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. Cornhill International Payments limited accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the above information.