A sea of red ink as tariff war heats up

May 14, 2019

An escalation in trade tensions between the US and China has seen markets hit hard overnight.

The EURUSD opened and closed rather flat but there was a short period of movement late in the session. The pair started the week at $1.12303 and remained steady throughout early and mid-session trading, dipping to a low of $1.12219. The euro then climbed to a high of $1.12631 a short time later before giving up most of those gains late in the day. It is currently trading at $1.12296. The GBPUSD looked set for a healthy session before a fall late in the day saw it fall into negative territory. The pair opened the week at $1.29905 and made steady gains through the first half of the day, peaking at $1.30397. It quickly gave up those gains, sharply falling to a low of $1.29397 just a matter of hours later. It has cone off those lows slightly, currently trading at $1.29564.

Indices were belted overnight as trade tensions weighed on key world markets. As expected, the Dow bore the brunt of the carnage, falling around 600 points overnight. The index opened at 25,763.95 and ticked up to an opening-hour high of 25,827.54. It was all downhill from there as the losses started out gradual then gathered momentum later in the session. The Dow eventually bottomed-out at 25,226.97 and is not far off those lows now, currently trading at 25,260.68. The Dax was unable to continue bucking the trend, falling over 200 points. The German index opened at a high of 12,091.78 and it was pretty much all one way as the losses piled up. The Dax fell to lows of 11,834.26 late in the day before closing at 11,865.20.

The day shapes up as an interesting one, with markets still reeling from the latest trade war escalation. There is also a stack of economic data due for release today. The most important piece of data being published today is the Average Earnings Index figure from the UK. This depicts wage growth for workers within the country. In times of economic uncertainty and a faltering economy, wage growth is crucial to keep inflation up and the economy growing.

Other data released today includes:

Australia – NAB Business Confidence

Japan – Economy Watchers Sentiment

China – Foreign Direct Investment

UK – Claimant Count Change, Unemployment Rate

Europe – Swiss PPI, European Industrial Production, European & German ZEW Economic Sentiment

US – NFIB Small Business Index, Import Prices, Mortgage Delinquencies, FOMC Members John Williams and Esther George speak


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