The trade war rhetoric over the weekend received quite a bit of attention from investors and traders in the early European session yesterday amid a lack of any major economic data releases. Risk was sold off, apparent in the reaction in equity markets, and GBP/USD looked at one point it was heading for a break below 1.32. In the latest headlines on the subject, Trump has criticised Harley-Davidson over its plans to move production out of the US as a way to avoid EU tariffs.
Before the H-D story emerged a WSJ report that Trump was considering widespread restrictions on companies that are foreign-owned, or moreover that the US could prevent companies with at least 25% Chinese ownership from purchasing businesses that had “industrially significant technology.” US trade advisor Navarro then came out and said there were no plans for such restrictions and markets breathed a sigh of relief. Risk appetite improved mildly, and GBP/USD pushed back towards 1.33.
Cable opens close to this figure this morning, and while the data docket looks a little light again today, it’s likely that the trade rhetoric will continue to steer currency direction. That said, MPC members Haskel and McCafferty are speaking this morning, and their comments may still get some reaction.