The US dollar has begun the week under pressure as markets recoil in response to news of fresh trade tariffs, announced last week, by President Trump. Trump revealed a new 10% tariff on a further $300 billion of Chinese goods due to start on September 1st. China has said that it will retaliate to this latest move from the US. Already today we have seen a sharp weakening in CNH with USDCNH trading up past 7 for the first time since the GFC. USD Index trades 97.60 last as the rejection from 98.26 continues.
Euro Rallies on USD Weakness
EURUSD has benefited from the sell-off in USD so far today. Price has rallied strongly back above the 1.1112 level to trade 1.1151 last. The collapse in European equities is also helping support EUR as investors buy back their EUR hedges, a theme which looks likely to continue in the near term.
GBPUSD has been a little more subdued today, though remains supported just above the 1.2078 level so far today. Price tested the level last week, finding support at the supporting bearish trend line running from mid-2018 lows. Last week, the BOE cited increased Brexit risks as a severe threat to the UK economy and no doubt the uptick in trade ware tensions will be closely watched also.
Risk Assets Crumble
Risk assets have been knocked heavily lower again this week as the reaction from last week’s US tariff announcement continues. SPX500 has collapsed back below the 2958.22 level to test the bullish trend line from last year’s lows around the 2890.56 level. Price has found support here for now though the prospect of further losses remains high.
JPY & Gold Rally
Safe havens have had a strong start to the week given the broad wave of risk aversion sweeping the markets. Both JPY and gold have rallied against the USD which has come under pressure since Trump’s trade war tweet last week. USDJPY trades 106.14 last, with price sitting just above the 105.55 support. XAUUSD trades 1457.47 last, its highest level since early 2013.
Crude Holds On
Oil prices have remained surprisingly well supported over the European morning on Monday. Following a sharp sell-off last Thursday, prices have since stabilized and remain well bid around the 54.90 level. Last week, the EIA reported a seventh consecutive week of decline in US crude stores, which is helping underpin price for now. The weakness in USD this morning is also helping keep oil afloat despite the latest increase in trade war tensions between the US and China.
Commodity Currencies Capped
USDCAD has been a little higher today, despite the weakness in USD and oil. The increase in trade war tensions is weighing on CAD at the start of the week. This is helping keep USDCAD well supported above the 1.3207 level, with price trading 1.3237 now.
AUDUSD is trading with a heavy tone today. The shock uptick in trade war tensions between the US and China, which is Australia’s largest trading partner, has weighed heavily on AUD. Price has broken down to its lowest level since 2009 this morning as risk assets have been heavily unwound.