Collinson FX: July 3 - Trade wars prospect triggers ANZAC drop

by Collinson FX 3 Jul 2018 04:55 PDT 3 July 2018

Nick Heiner (NED) Oceanbridge NZL Sailing Regatta, Day 3, February 5, 2018, Murrays Bay SC © Richard Gladwell

Political uncertainty in Europe dominated overnight markets. German Chancellor Merkel, is fighting for survival, over the issue that has defined her leadership. Merkel met with EU leaders to resolve the immigration crises and came up with an intermediary agreement, that has been rejected by her key domestic ally, the CDU. Adding to the political turmoil is the pressure over trade. The US has threatened sanctions over European cars, in an effort to address the massive trade imbalance, working towards adopting reciprocal and fair trade agreements. The pressure is mounting and the uncertainty is sending shudders through markets.

European Unemployment improved to 8.4%, but remains dangerously high, while Manufacturing PMI was soft. The EUR slipped back to 1.1600, while the GBP drifted to 1.3120, mired in ‘brexit’ complications. The ‘global trade wars’ have continued to impact trade exposed currencies, with the AUD crashing to 0.7320, while the NZD fell below 0.6700. The RBA meets today and are unlikely to move rates. They will be careful in their associated commentary after the RBNZ dovish rhetoric last week. The trade threat will likely be mentioned and the illumination of the fallout, may frighten markets. The RBA statement is likely to have an impact, although the currency has fallen a long way recently, but support levels are few and far between?

Trade remains the singular issue driving global markets, but the Central Bank action, will influence local currencies.

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