Global market sell-off accelerated on Wednesday as China quickly responded to fresh Trump’s tariffs with similar measures against some key American imports including soybeans, cars, beef, chemicals and planes. Beijing issued a $50 billion list of 106 US goods that will be subject to levies. Moreover, the world’s second-largest economy urged WTO members to resist US trade protectionism, which raises the prospect for this trade conflict moving to a global level. It is not surprising that risk aversion has intensified against this background. And more losses still to come. As such, Britain’s FTSE 100 declined by 0.48 per cent to 6,996, France’s CAC 40 dropped 0.73 per cent to 5,114 and German’s DAX 30 slumped 1.11% to 11,867. Wall Street futures point lower, with Nasdaq risks testing an important long-term trend line. Soybean futures fell dramatically after Beijing announced 25% tariffs on US oilseeds exports.
Currency markets begin to reflect the escalating trade tensions, too. The greenback is under a general pressure, losing ground against the safe-haven yen after yesterday’s relief rally which turned out just another selling opportunity. The Japanese currency could yet benefit substantially from the trade war, should the two countries continue to behave in the same spirit. Technically, the pair still needs a break above the 107.00 threshold in order to frighten some bears away. But as long as the “exchange of trade fire” is in market focus, the downside risks will prevail. Therefore, any recovery attempts may be new opportunities for selling the American currency which looks unattractive amid Trump’s aggressive external policy.
The EURUSD pair is trying to stage a recovery from yesterday’s losses, but the dynamics looks unconvincing and shaky even as the dollar remains on the defensive. The price still fails to make a run above the 1.23 mark, and fresh eurozone CPI data didn’t help either. Headline inflation in the region rose in March after three months of declines, but it was widely expected by the market. Moreover, core CPI disappointed as the index remained at 1.0% against consensus of 1.1%. On the whole, these numbers don’t change the inflation picture for the ECB, and therefore were ignored by the single currency. Meanwhile, strong US ADP data failed to inspire the greenback and gave it only a short-term boost whish faded quickly. The report showed US private sector employment increased by 241K in March which surpassed even the most bullish estimates as well as the previous month’s figure 235K. The muted market reaction confirms that trade wars remain the key focus for traders for the time being.
GBPUSD suffered a decline after a dismal UK construction PMI which decreased to 47.0 in March falling into contraction territory. Following the release, the pair quickly dived to fresh daily lows just above the 1.40 level. However, the pound managed to attract dip buyers and reversed its losses. Such a behavior signals further bearish risks for the American currency amid escalating trade tensions as even deeply disappointing economic signal failed to cause pound’s sustained weakness. So, the pair may gradually climb back above the 1.41 figure as sterling keeps the overall decent tone.
The intensified trade tensions start to hit commodities either. After a brief respite, crude oil prices resumed the bearish move and slipped to fresh two-week lows Wednesday. The sell-off is mostly due to market fears over the global economy and the Chinese demand for oil, which is one of the key drivers for the market. Against this backdrop, other internal factors take a back sit for the time being, including the potential fresh positive comments by some OPEC members. In these circumstances, Brent is poised for further decline and may lose the $66 mark in the short-term. The immediate significant resistance is now at $68.10.
Gold prices resumed the rally and jumped to fresh April highs close to $1,350, though the bulls don’t dare to attack this threshold so far, hoping for further sell-off in the greenback. After a recent bullish wave, the short-term technical prospects for the yellow metal have improved somehow, though the prices are yet to confirm a break above $1,340 which is now the immediate support for gold.
Nathan Lambert, Head of Global FX Analytical Departament