US-China Trade War – Market News and Technical Analysis

  • US-China trade war escalates further.
  • Safe haven assets unchanged for now.
  • President Trump expected to rattle EU over NATO spending commitments.

The DailyFX Q3 Forecasts have just been released and cover all the major asset classes.

USDJPY and Gold Not Reflecting Political Upheavals

The US-China trade war escalated overnight when US President Donald Trump announced new tariffs on $200 billion worth of Chinese goods, in a move that is expected to provoke a response from Beijing. The list of tariffs, announced after the US stock market had closed rattled investors and sent Asian bourses lower, but did not provoke a rally in any of the traditional safe-havens, USD, CHF, JPY or gold. The new tariffs will have a two-month review before implementation, the US administraion said.

How do Tariffs Impact the Economy?

US President Trump is also expected to rattle various EU members today at the start of the NATO meeting in Brussels. Trump reiterated on Tuesday that he expects all EU countries to meet their spending commitment to NATO (2% of GDP) with only 5 members currently meeting their obligation.

With trade-war fears increasing and the US rattling the EU over NATO, safe-haven assets should be in demand but the Swiss Franc, Gold and the Japanese Yen are all unmoved after the latest round of tariffs.

USDJPY is currently 0.15% higher at 111.105, USDCHF is just 0.10% lower at 0.99110 while Gold changes hands 0.20% lower at $1,252/oz.

It seems currently that the ongoing strength of the US dollar is negating any traditional safe-haven buying, most noticeably in gold, with short-end US interest rates continuing to inch higher. The UST 2-year currently trades around 2.58%, just a couple of basis points below its multi-year yield high.

US Treasury 2-Year Yield Chart (January 2006 – July 2018)

US Dollar, Gold, JPY; Unfazed by US-China Trade War Escalation

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What’s your opinion on the latest escalation of the US-China trade spat?

Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at Nicholas.cawley@ig.com or via Twitter @nickcawley1

--- Written by Nick Cawley, Analyst