Tuesday, June 26, 2018

Trump's policies threaten global growth with Dollar and equities on the defensive

Tags
  • Dollar
  • Euro
  • Gold
  • Yen

MORNING BRIEFING

The Dollar starts the week on the defensive as Trump's protectionist agenda threatens to slow down global growth and dampens appetite for the US currency. Overnight remarks from White House trade adviser Peter Navarro did little to change the tides when he was quoted saying that the rumored measures against Chinese investments in “sensitive” US industries will not be as severe as markets expect. The Dollar ended the day in the red against the Euro and the Yen while equities trimmed their losses but still closed below water.

The Euro was among the winners yesterday rallying to 1.17 on the back of the steady and somewhat optimistic German IFO report that helped the currency extend its rally. This morning the shared currency is trading just shy of the 1.1730 resistance which is the intra-day barrier to overcome if more gains are to be expected. There's little in terms of Euro-related news today but the US Consumer Confidence report will play a key role in dictating price action: a softer US report today will allow the Euro to continue rising with the 1.1850 area coming into focus.

The Dollar/Yen hit 109.40 yesterday shrugging off Peter Navarro's comments that briefly took the currency pair to 110; investors immediately jumped on the opportunity to sell the Dollar again forcing another test of this support level. Even though from a technical perspective Dollar/Yen has formed a double bottom on the short-term charts, a bounce higher seems less likely and depending on how the US Consumer Confidence data prints we could see more losses. A break below the 109.40 lows will expose the 108.50 area.

The British Pound spent the past 24 hours trading sideways but this might not be the case today. There's nothing on the economic calendar is terms of fresh data however traders will be eager to hear from Jonathan Haskel who was chosen to replace McCafferty on the Bank of England Monetary Policy Committee. Clearly the focus here is whether Haskel stands on the bullish or bearish side and how this would affect the BoE's stance in terms of raising rates this year. If Haskel sounds bullish and in favor of tightening soon then the Pound will rally immediately towards the 1.3550 area while a cautious tone will downplay expectations and send the currency to 1.3180 and possibly 1.31.

Commodities traded sideways yesterday with Gold lacking any momentum towards either direction while Oil ended the day around the $68 mark. The yellow metal has not responded to the elevated trade tensions between the US and the rest of the world but from a technical standpoint a bullish opportunity seems to emerge: a double bottom has formed around the $1,263 level which could trigger a move to $1,272 and a break there exposes the $1,280 level. Oil tries to build a base of support at the $68 mark and if successful more gains will drive prices to the $70.50 area.

Finally, equities had a bearish day yesterday as Trump's agenda of protectionist measures is threatening US and global growth. Economists from around the world are expressing their concerns that a global trade war could send the US back to a recession and investors are taking a defensive approach as a response. The European futures are pointing towards a negative opening bell this morning reflecting the nervousness seen in the US and Asian markets overnight and even though the Dow Jones futures suggest a slightly positive opening the bias for the day looks negative.

MARKET EVENTS TO WATCH

  • Haskel Speaks at BOE Appointment Hearings - 1pm

  • US Consumer Confidence Index - 6pm

All times are GMT +4.

 
Billion
Positions Opened
 
Thousand
Active Users
 
Trillion
Traded Value