May 29, 2020

Trade uncertainty weighs on Forex traders’sentiment

LQDFX news blog: Trade uncertainty weighs on Forex traders’ sentiment

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Trade uncertainty prevails in the markets. Trade disputes, highly affecting investors’ sentiment, have been their main concern since the beginning of 2018.

NAFTA talks continue with no remarkable progress as three key issues has not been resolved yet. The negotiations for the modernization of the trilateral agreement between Canada and the USA focus on: Chapter 19, the cultural issues and dairy.

Trump has threatened to proceed with a bilateral deal with Mexico, abolishing NAFTA, which covers $1.2 trillion in trade.

The deadline for the public consultation for Trump’s plan to impose tariffs on China expired at midnight. It is not clear whether the US administration is to escalate the trade dispute by imposing tariffs on $200 billion more in Chinese imports. If this happen, it would be the second phase of this trade war. The world’s two largest economies have already imposed tariffs to $50 billion of each other’s goods.

Such trade concerns also weighed on sentiment after the US President threatened fresh tariffs on another $200 billion worth of Chinese imports.

German industry output fell unexpectedly in July by 0.9%. Trump’s protectionist trade policies hit German exports, while imports climbed a 4-year peak.

August U.S. non-farm payrolls report is due at 1230 GMT. Experts expect about 191.000 more jobs in August, with average earnings at 0.2% month-on-month compared to 0.3% from July. The unemployment rate for August is expected to go back to 3.8% from 3.9% in July.

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Forex Market and Trade uncertainty

Safe heaven currencies gained as they always do during times of economic and political instability.

The Dollar traded lower against its major traded rivals despite trade concerns, with the traders focusing on non-farm payrolls report. The dollar index dropped 0.13%. The US dollar dropped in a 4-month low against the Swiss Franc.

The Australian Dollar dropped more than 0.5% to a 2-1/2 low as trade uncertainty between the States and China is general. The Aussie, often seen as a liquid proxy of China-related trades, is vulnerable to a worsening trade conflict.

The Sterling inched up 0.1% following a volatile week and negative Brexit headlines. The pound edged down 0.1% against the single currency as well.

Oil prices traded flat as trade war escalates and US crude inventories drop to a 3-year low. Brent crude futures were up 16 cents a barrel, while U.S. crude futures rose by 8 cents from their last close.

Gold prices and silver prices steadied following dollar’s dip against yen over looming China-U.S. trade tariffs. Spot silver was up 0.2 percent at $14.1 per ounce.

Sources: Reuters, CNN money, BBC

PLEASE NOTE The information above is not investment advice.