Collinson FX: July 12 - Trump Trade war hits KIWI

by Collinson FX 13 Jul 2018 03:22 UTC 3 July 2018

Kaipatiki - Oceanbridge NZL Sailing Regatta, Day 3, February 5, 2018, Murrays Bay SC. Remarkably this Naiad designed vessel is over 24 years old and in exceptional condition © Richard Gladwell

Collinson FX: July 12 - Trump Trade war hits KIWI

The Dollar became the story overnight, as the US announced further tariffs on Chinese goods, while Trump took NATO to task. Equity markets forgot about economic fundamentals and focused on the a White House plans to impose a 10% tariff on a further $200 Billion worth of Chinese goods. The implementation is not scheduled until August so the stakes are rising.

The EUR fell back to 1.1675, while the Yen broke above 112.00, further highlighting a bull-run in the Big-Dollar. The rising reserve hit the commodity currencies, with the AUD dropping to 0.7370, while the NZD crashed to 0.6750. The tariff threats also add to the woes of these trade exposed countries.

More stern words are likely from Trump during the crucial foreign tour. He is playing from a position of strength, when it comes to trade and defence and it is difficult to see how he cannot succeed.

50fters get off the start line in Bay of Islands Sailing Week, 2018 - photo © Richard Gladwell

Collinson FX: July 9 - Trade war fears settle

Markets closed the week on a positive note, supported by better than expected employment numbers and despite trade sanctions. The US implemented $34 Billion in tariffs on China, who retaliated, but Trump has threatened a further $500 Billion!? The trade war ratchets up but markets shrugged this off. Non-Farm Payrolls came in stronger than expected, although the Unemployment rate edged up to 4%, due mainly to a rising participation rate. This all floated the markets boat.

German Industrial Production jumped 2.6% and a risk off market environment allowed the EUR to recover to 1.1750, while the GBP approaches 1.3300. ‘Brexit’ pressures are a rising crescendo, with Tory Cabinet Ministers meeting to decide the way forward. The AUD broke back above 0.7400, while the NZD blew through 0.6800, as trade fears settled. Commodity and Trade exposed nations, such as Australia and NZ, remain heavily exposed to a global trade war and the associated currencies will reflect this.

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