March 29, 2024

Tariff war weighs on global trade, manufacturing

LQDFXperts Weekly Highlights: Tariff war weighs on global trade, manufacturing

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The World Trade Organization (WTO) said that growth in global trade is expected to remain “below trend” in the fourth quarter.

Tensions and rising tariffs in key sectors weigh on global goods trade. Its latest quarterly barometer showed growth in global merchandise trade rose by 0.2 pct in the second quarter of this year against 3.5 pct in same period of 2018.

The tariff war has taken a toll on the world’s manufacturing as well. Data from the U.S. Federal Reserve on Friday showed the U.S. manufacturing downturn deepened in October. China data came out last Thursday also showed a slowdown.

Trade headlines continued to rock markets with Powell’s testimony diverting some of the attention. Both topics remain in the spotlight, with housing figures, and euro-zone data also eyed.

However White House sent positive trade signals on Friday and a breakthrough was supported by a report on Sunday from Chinese state news wire. Xinhua reported Washington and Beijing had a high-level phone call on Saturday. The news wire added that the two sides discussed each other’s core issues for the first phase of an initial trade agreement.   

The EUR/USD enjoyed a quiet week and posted slight gains.

Dollar/Yen reversed directions last week, posting modest losses. Investors are keeping an eye on Japanese trade balance and Flash Manufacturing PMI.

The swings continue for GBP/USD. The pair gained 1.0% last week, erasing most of the losses seen in the previous week. British GDP declined by 0.1% for a second straight month in September. Despite this weak reading, second-quarter GDP posted a gain of 0.3%.

AUD/USD posted losses for a second straight week. This week’s key event is the RBA minutes.

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LQDFXperts – The week ahead – Tariff war weighs on global trade, manufacturing

  • On Tuesday (19.11) the Reserve Bank of Australia will be releasing its Policy Meeting Minutes. The RBA’s minutes will be closely watched for any hints of a possible rate cut in the near term. The central bank already signaled that rates could be cut further. If the RBA’s minutes hint at further easing the AUD may lower sharply.
  • On Wednesday (20.11) the FOMC meeting minutes will be up. The minutes cover the Fed’s meeting from late October. In that decision, the Fed cut rates but signaled a pause – at least for now. The minutes will shed light at the tendency among central bankers and help markets assess the next 2020 moves. The Fed’s thoughts on trade relations, inflation, and employment are of interest.
  • On Thursday (21.11) the European Central bank will release the meeting minutes for its meeting held in October, presided by the outgoing Mario Draghi. ECB cut rates and announced the restart of the bond-buying scheme. The minutes might not have that much of an impact on the markets.
  • On Friday (22.11), Eurozone Data releases will focus on the flash manufacturing and services PMI from Markit, covering November. The following data are of special interest for investors: French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI, Eurozone Flash Manufacturing PMI. The preliminary figures for November may impact global markets as they indicate tendencies in global growth.

Follow this week’s economic calendar.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, CNBC, FX street