Global Themes


Trump unveils additional tariffs on Chinese goods

Risk-off sentiment renews
Just as markets were beginning to stabilise, with the NZD recovering against the USD, and trade war fears subsiding, President Donald Trump unveiled additional tariffs on $200 billion of Chinese goods Tuesday night (US time). The NZD/USD plummeted ~1.2% overnight, back toward recent support around 0.6700. The decision resonated through to the US equity market almost instantly with the DOW falling, renewing fresh fears of trade war tensions once again. Adding to the discontent, being unable to match US tariffs dollar for dollar, China announced that they would look to "hit back in other ways". This statement appears to have added fuel to the risk-off fire, with the US dollar index jumping approximately 0.72% overnight.

If trade fears and anti-trade sentiment proliferates it is likely that we may see safe-haven currencies gain gain ground. Importers with exposure to the JPY and USD may like to pay attention to support levels and manage their risk accordingly.

Draghi speaks, prompts EUR strength
Europe continues to rise

ECB President Mario Draghi spoke on Wednesday night (NZ time). While Draghi avoided commenting on monetary policy the overall tone of his address was EUR positive, noting several points, pushing the NZD/EUR lower by approximately 0.76%.

The euro area economy grew by 0.4% during the first quarter of 2018, marking five years of continued economic expansion. Underlying economic fundamentals remain solid, notwithstanding some moderation in growth at the beginning of the year. The labour market has improved with unemployment at 8.4%, the lowest since December 2008, with employment having risen by 8.4 million since 2013. Despite not directly commenting on monetary policy, the positive tone suggests that a rate hike from the ECB could be growing in probability.

The end of the week
US CPI ahead

  • Midnight - US CPI & US unemployment
  • Friday: 10.30am - NZ business manufacturing index

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