STOCKS RISE AS TRUMP MOVE ON CHINESE INVESTMENT CALMS MARKETS
Chinese stocks fell today after a report said that China was preparing for a full-scale trade war with the United States. According to the report, President Xi told the biggest policy makers that there were no chances of a truce between the two countries. He also said that the country was prepared to issue tariffs of its own on American products. Additionally, the PBOC was also prepared to reduce or completely halt the purchase of US treasuries. This would have major impacts on the global economy and lead to a recession. Hong Kong’s Hang Seng and Shanghai Composite indexes fell by 1.80% and 2.5% respectively.
European stocks and US futures rebounded after a statement from the Trump administration said that the president would not limit Chinese investments to the US. The new proposal will be similar to the status quo where the Committee of Foreign Investments in the United States (CFIUS) reviews all investments individually.
The Great Britain Pound (GBP) fell today and is currently trading at 1.3184 against the dollar. Earlier today, the Nationwide Building Society (NBS) released the housing price index data that beat analysts’ forecasts. In June, housing prices rose at a monthly rate of 0.5% which was higher than the expected 0.3%. On an annual basis, the index rose by 2.0% which was higher than the expected 1.7%. Still, this is the lowest the index has been since 2013.
The Bank of England (BOE) released the financial stability report. In the report, the officials highlighted the key risks in the country’s financial system. One of the risks was the increasing non-mortgage debt such as cars and credit card. They were also concerned about Brexit with the governor saying that the financial system would face disruption if the EU fails to safeguard contracts worth £29 trillion. These are the derivatives contracts held by European banks to manage risks within the financial system.
Yesterday, the Consumer Board released the consumer confidence numbers from the United States. The numbers showed that consumer confidence in the country was waning. In June, the consumer confidence fell to 126.4, which was lower than the expected 127.6. Since the Donald Trump election, the confidence has risen from 113 to the current 127 but the pace seems to be falling. Today, the
In the United States, the Census Bureau released the durable goods numbers which fell by negative 0.6 percent. This was better than the expected negative 0.9 percent. The core durable goods numbers were worse than expected. They fell by negative 0.3 percent in May compared to the expected 1.5% gain. In addition, the goods trade balance was negative 65.4 billion dollars in May compared to the expected $68.4 billion. The deficit has been falling since March when it reached a low of $75.8 billion.
Yesterday, the EUR/USD pair crossed the important support of 1.1700. Attempts to recover some of the gains failed and today, the pair is trading lower at 1.1610. The current price is below the important 14 and 21 moving average levels of 1.1645 and 1.1640 respectively. The RSI is currently near the oversold level while the bears power is showing signs of normalisation. The pair will likely continue move lower as traders wait for the US GDP numbers tomorrow.
The GBP/USD pair dropped today and is currently trading at the lowest level since Thursday last week. Most of the losses were attributed to a stronger dollar and a press conference by Mark Carney. The pair’s price is currently below all the major moving average points as shown below. Today, after trading within a narrow range, the pair broke out below the important support of 1.3205. Therefore, as traders wait for the GDP numbers tomorrow, the pair is likely to continue moving lower.
As the dollar strength continued today, the price of gold fell to the lowest level since December last year. An ounce of gold is now trading at $1255 level. On the daily chart below, the XAU/USD pair established found an important resistance at $1365. Since then, the pair has been forming new lows and struggling to find support. The pair is trading below the important 100 and 200-day moving averages. As the fall continues, there is a possibility that the pair will try to test the support level of $1235.