"It's quite a whirlwind of things happening on the trade war front," says John J Hardy, Saxo's Head of Forex Strategy, after a weekend that saw president Trump castigate the EU as "possibly as bad as China, just smaller". This has exacerbated the already strained US/EU trade relationship and Europe will now, like China, seek to impose its own retaliatory tariffs.
In forex markets, the dominant theme is a sharply weaker Chinese yuan. "This deserves all the focus, against the USD we're getting to levels where the temperature is really turning up higher. Pay attention to this, of course at some point the Trump administration is going to respond," says Hardy.
Elsewhere, the Mexican election resulted in a strong parliamentary majority for the leftist popularly know as Amlo, and he might win control of the senate too, putting the left in a very powerful position in the US' southern neighbour. In Europe, German political chaos persists as Chancellor Merkel continues her efforts to save her coalition, which is on the point of collapse over immigration policy.
It's been a busy weekend in oil markets too, also triggered by a tweeting Trump who declared on Saturday that Saudi Arabia's King Salman had agreed to increase production of crude oil by up to two million barrels a day in order to reduce market prices and make up the shortfall from Iran and Venezuela, says Ole Hansen, Saxo's Head of Commodity Strategy. Trump's message was subsequently diluted in an additional statement by the White House press secretary.
"We have to stick to the facts now, and those facts are that we have high oil prices at the moment because of supply disruptions, including some which have been caused by Trump himself, especially against Iran," Hansen notes. But though oil prices are elevated for now, this may not last very much longer, he adds: "Weaker economic growth may trigger a halt to the rally. China, Japan and South Korea all reported a slowdown in export orders in June amid an escalating trade dispute with the US," Hansen concludes.
Quarterly Outlook Q3 2022: The Runaway Train
- Central banks' attempts to kill inflation is a paradigm shift, which could end in a deep recession.
Tangible assets and profitable growth are the winnersWith US equities officially in a bear market, the big question is where and when is the bottom in the current drawdown?
Understanding the lack of investment appetite among oil majorsThe everything rally seen in recent quarters has become more uneven, as its strength is driven by commodities in short supply.
The pressure is on as the wind leaves the sailsWith cryptocurrencies in sharp decline, are we entering a crypto winter or is the bear market a healthy clean-up of the crypto space?
Why the Fed can never catch up and what turns the US dollar lower?Many other central banks are set to eventually outpace the Fed in hiking rates, taking their real interest rates to levels higher than the Fed will achieve.
Bank of Japan: Swimming against the tideThe Japanese economy has gone from the age of deflation to rapidly rising prices in no time, leaving the Bank of Japan in a pickle.
Green transformation detour and bear market hibernationWith the impending risk of global econonomic derailment, we share the five things investors need to consider in this new half year.
Crisis redux for the eurozone?Whether there's going to be a recession in Europe or not, the path towards a stable economy will be agonizing.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)