FXTM Weekly Roundup: Another week dictated by global trade developments
It has been another trading week dictated by global trade developments as President Trump threatened to impose tariffs on an additional $200 bln worth of Chinese goods. This threat instantly sparked fears of a full-blown trade war becoming reality - something which was reflected across global equity markets. However, markets later stabilised on expectations of the United States and China reaching a deal on trade before the tariffs are imposed in August.
In the United Kingdom, political risk and Brexit-related uncertainty ruined investor appetite towards Sterling. Reports of Theresa May losing both her Brexit and Foreign secretaries sparked fears of political instability while raising questions over the direction of Brexit. Although the UK government released its Brexit blueprint, it all depends on how the European Union responds to the proposal. If the EU rejects the White Papers, fears could heighten over a possible no-deal outcome.
The Dollar was heavily bullish this week on rate-hike expectations, while the Euro continued to edge lower thanks to the monetary divergence between the Federal Reserve and European Central Bank.
Focusing on commodities, it is becoming increasingly clear that oil bulls remain heavily reliant on geopolitics to sustain the current bull rally.
Reports of Libya reopening its oil ports sent oil prices crashing while robust production from US shale could compound to the downside. With speculation in the air over Saudi Arabia dipping into its spare capacity to add up to two million barrels per day to the markets, further losses could be witnessed.
As regards Gold, its depreciation continues to revolve around a broadly stronger Dollar. As long as the Dollar remains firm and expectations elevated over interest rates, Gold is poised for further losses.
Investors will direct their attention towards US retail sales figures next week to gauge the health of the US economy.
In the United Kingdom, the jobs report, retail and inflation figures may offer insight into when the BoE may raise interest rates this year. Global trade developments are likely to remain in the spotlight with investors closely watching to see if tensions escalate or de-escalate.
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