GLOBAL MARKETS FALL AS THE THREAT OF AN ALL-OUT TRADE WAR INCREASES

Global stocks markets fell today as the rhetoric on trade increased. On Friday, Donald Trump sent a tweet threatening tariffs on European cars. During the weekend, he reiterated this with a tweet on reciprocity on trade. In addition, his administration announced that it would move to bar Chinese investments in American companies. The administration will use an obscure law on homeland security to prevent Chinese companies and individuals from investing in the United States. In the past, the US has accused China of using such investments to own assets considered to be of increased importance.

The euro was little moved today against the dollar even as ifo released the business climate index. This is a monthly data piece that gives investors an opportunity to look at the minds of business executives. The data showed that the index was at 101.8, which was lower than the expected 101.9 and last month’s 102.2. In January, the index reached a high of 117.6. In the following months, it fell sharply as executives remained worried about the implications of a trade war.

The Canadian dollar was little changed today after Friday’s disappointing CPI and retail sales data. The country reported that the CPI for May rose at an annual rate of 2.2%, which was lower than the expected 2.5%. The closely-watched core CPI rose at an annual rate of 1.3% which was lower than the expected 1.4%. Additionally, the retail sales continued to contract. The core retail sales fell by minus 0.1% compared to the expected gain of 0.2%. The disappointing data shows that the Bank of Canada will be hesitant to tighten any time soon.

Over the weekend, Turkish residents went to an election. The results announced earlier today showed that the incumbent president – Recep Erdogan – won the election. The implication for his election victory will reverberate across one of the most important emerging markets economies. Recently, he has talked about increasing his influence on monetary policy decisions. This will mean more trouble for the Turkish lira, which has lost more than half of its value in the past few years.

The Japanese yen fell today after the Bank of Japan (BOJ) released the Summary of Opinions at the Monetary Policy Meeting held earlier this month. The minutes showed that officials were concerned about the moderate expansion of the Japanese economy and the low rate of inflation. The officials were concerned that a rate increase would be unwise for the country. This means that the period of low interest rates was likely to continue.

EUR/USD

The EUR/USD pair jumped on Thursday from a low of 1.1507. Today, the pair has remained in these elevated levels and is currently trading at 1.1660 which is also the 23.6 Fibonacci Retracement level. As traders wait for the US GDP numbers on Thursday, the pair is likely to continue moving lower. At this point, it is likely to fall to 1.1590, which is the 50% Fibonacci Retracement level.

USD/JPY

The USD/JPY pair slid today after a dovish statement from the Bank of Japan. The pair fell to an intraday low of 109.37, which is the lowest level in almost two weeks. The current price is in line with the two and three weeks moving average. The average directional index is currently at 19, which is an indication that the downward trend might not be a good trend. It is likely that the pair will reverse and possibly test the important resistance level of 110.

USD/CAD

On Friday, Canada released the CPI and retail sales numbers that disappointed the markets. The pair rose from 1.3253 and reached an intraday high of 1.1.3380. Since then, the pair has fallen slightly and is currently trading at 1.3297. The money index indicator shown below is currently at 40 which is lower than 66 where the pair was earlier today. The current price is in line with the two and three-weeks moving average. As the divergence between the BOC and Fed continues there is a likelihood that the pair could continue heading higher.