Headlines last week again dominated the spotlight as investors fled to safety over escalating trade war concerns. The beginning of the week was exceptionally volatile for global FX markets, as Traders attempted to work out a strategy in a changing landscape.
President Trump was again the catalyst for volatility in trading, announcing last week that he was considering 10% tariffs on $200b worth of Chinese imports. Still, the Chinese response was swift, releasing a statement saying that it intended to take ‘comprehensive quantitative and qualitative measures’ should the tariffs be implemented. Currently, China imports approximately $130b worth of goods and cannot match the duties directly. Analysts suggest they could achieve their counter in a variety of ways to adjust for this, including increased regulatory scrutiny.
Investors across the globe took the news poorly with a flight to safe-haven currencies and assets. The S&P dropped 0.5% straight away, and the Shanghai Composite lost 4%. US 10-year treasury yields fell to 2.85% from 2.92% and the Japanese Yen (safe-haven currency) appreciated by 1%.
Elsewhere, the USD did have some movement against some of the cross rates with the EUR and GBP being the clear performers. Changing hands at 1.3243, the Sterling enjoyed a 160-pip rally on the back of a hawkish monetary policy statement. Across the channel, the EUR also faired markedly better than it had been, recording a 100-pip rise against the Dollar before settling at 1.1655.