FXTM weekly round-up: Trump, Sterling and OPEC
Global trade developments remained a major market theme this week, as Donald Trump threatened to impose tariffs on as much as $450 billion worth of Chinese goods. Fears of a global trade war rapidly advanced following Trump’s threat, with stock markets crashing across the board. Although a sense of calm was brought back into markets mid-week after China’s central bank urged investors to “stay calm and rational”, sentiment remains cautious.
In the United Kingdom, Sterling received a boost following an unexpectedly hawkish statement and MPC vote split from the Bank of England. While July’s hawkish BoE meeting could boost expectations of a UK rate hike this year, ongoing Brexit-related uncertainty may present headwinds further down the road.
Interestingly, the Dollar appreciated to a new yearly high above 95.45 this week and could be poised to extend gains amid speculation of higher US interest rates in 2018.
Speaking of US interest rates, emerging market currencies were a casualty of Fed hike expectations this week. Trade tensions between the US and China are also likely to weigh heavily on emerging markets, while the prospect of higher US interest rates may accelerate capital outflows. The threat of increasing global protectionism remains a major threat to developing nations.
Gold was hammered by a broadly stronger Dollar and is poised to conclude the week heavily depressed. In regards to Oil, the outlook remains heavily dictated on the outcome of Friday’s OPEC meeting in Vienna.
The upcoming trading week
is
likely
to
remain dominated by ongoing trade developments and potential Oil price volatility. Much focus will be directed towards the firstquarter US GDP results, which could offer insight into the health of the US economy. A strong GDP print could boost the Dollar and raise prospects of higher US interest rates, ultimately pressuring emerging markets.
In the United Kingdom, Bank of England Governor Mark Carney is due to hold a press conference on 26 June about the Financial Stability and the bank stress test reports.
All in all, global sentiment is expected to remain cautious as markets wait for new developments on trade.