FXTM Weekly Roundup: China trade war, Fed rate decision in focus
Investors entered the trading week adopting a “wait and see” approach as President Trump’s tariffs on $200 billion worth of Chinese goods came officially into effect on Monday.
Fears over the tit-for-tat tariff battle between the United States and China promoted a risk aversion mood within equity markets, emerging market currencies and riskier assets under pressure.
Dollar bulls were missing in action despite the market uncertainty, which fuelled speculation that the Dollar rally was coming to an end.
Investors were waiting in anticipation for the Federal Reserve rate decision on Wednesday which concluded with a 25-basis point rate hike. Financial markets offered a fairly muted response to the rate increase as this move was already heavily priced in. However, the key takeaway from the meeting was the removal of the word “accommodative” from the statement which suggested slower interest rate increases next year.
The Dollar surprisingly appreciated on Thursday as investors overlooked the dovish Fed meeting but focused on prospects of a rate hike in December.
Other than the Fed, the most popular talking point across financial market headlines was the relentless appreciation witnessed in global Oil prices after OPEC and Russia rejected Trump’s demand to boost output. Brent Crude soared to levels not seen since November 2014 when it was above $82.0. With looming U.S. sanctions against Iran and falling production from Venezuela accelerating the tightening of markets, Oil prices have scope to appreciate further.
It was a terrible trading week for the Pound thanks to Brexit uncertainty and political drama in Westminster. The Pound’s downside was fuelled by an appreciating Dollar which sent the GBPUSD towards 1.3050. With fears of a “hard Brexit” souring investor appetite for the British Pound, the outlook remains bearish.
Gold prices tumbled to a fresh monthly low, following reports of the U.S. economy expanding 4.2% during the second quarter of 2018. With the metal breaking below the $1,190 support and poised to conclude the week on a negative note, bears could take the driver’s seat in the new trading week.
The upcoming trading week will be jam-packed with economic reports from the United Kingdom and the United States. Much attention will be directed towards the UK PMI which could offer insight into the health of Britain’s economy. All eyes will be on the U.S. jobs report which could spark volatility across financial markets. For information, disclaimer and risk warning note visit: www.ForexTime.com
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