US-China trade wars causing market havoc

Hi everyone,

China today has devalued its currency to take the sting out of upcoming tariffs from the US and a near-term deal looks all but dead in the water once again. Why does this effect you?

Well, firstly trade wars are bad business for the whole world as a collective. Stocks, bonds, yields and currencies can all fall. Investors will flock to safe haven currencies to protect profits and the £ is not one of those currencies. China has ultimately made this decision to entice worldwide importers to buy directly from China with the Yuan and not the $ and to ease pressure on Chinese exporters. 

There has been fresh two-year lows for GBP/EUR today, losing another 1% in a week on the back of yet more stern hard Brexit noise. An early election being called by Boris Johnson seems to be gathering momentum. We feel that the EU are betting on a Conservative loss and then a second referendum to follow. If however the Conservatives win, only then may we see the EU re-negotiate after another final delay in October. This scenario will promote real £ strength of 3%+ initially. 

At this stage it looks very unlikely the Pound will plateau. There will be either a big jump up or further declines from here in the weeks to come. Current conditions suggest there is no support for Sterling.

Data-wise it is a very slow week until key figures from the UK on Friday. There is a flurry of data due out at 8:30am that will shape how the £ ends this week and starts the next. Germany publishes daily data this week, which will no doubt be moving the Euro.




Upcoming Data


Tuesday, 6th August, 2019

06:00 EU - German factory orders
07:30 EU - German PMI

Wednesday, 7th August, 2019

06:00 EU - German industrial production 
07:30 UK - Halifax house price index
11:00 US - Mortgage applications
19:00 US - Consumer credit
23:00 UK - House price balance

Thursday, 8th August, 2019

08:00 EU - ECB publishes economic bulletin
12:30 US - Jobless claims

Friday, 9th August, 2019

06:00 EU - German trade balance, imp/exp figures
08:30 UK - GDP, government spending, private consumption
08:30 UK - Industrial/construction/manufacturing output & trade balance
12:30 US - PPI


Dan Waterman
Office Manager

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