The risk sentiment remains under pressure after the comments by China about the countermeasures against the US tariffs. Thus, the AUD/USD and the USD/JPY pairs will be under our attention.
Global factory surge speeds down due to US-China trade clashes
In July, factory surge speeded down around the globe, raising worries as for the global economic outlook because an escalating trade war between China and the USA affected the global economy.
Global economic activity is still firm, although it has already passed its maximum, according to market experts surveyed by Reuters in July. They actually expect protectionist policies on trade that don’t demonstrate any indications of relief to tap the brakes.
However, decelerating surge, diving confidence as well as trade war worries won’t probably deter key financial institutions from giving up their ultra-loose monetary policies activated during the last financial downtime.
Surge is still resilient. Wages and inflation go up, while unemployment rates happen to be low. All of this gives major banks grounds to proceed with tightening, as some financial analysts pointed out.
The previous month, the United States and China slapped tit-for-tat duties on $34 billion of each other's products and another round of duties on $16 billion is anticipated to kick in August.
According to some sources, the current US presidential administration is braced for slapping 25% duties on a further $200 billion of imports, in contrast with an initial proposal of 10%. Trump’s threat of tariffs on the entire $500 billion worth of Chinese products is still actual.
The Chinese government has promised equal retaliation. However, this Asian country imports approximately $130 billion of American products.
On Wednesday, world equities headed south and the evergreen buck rallied on worries of an approaching escalation in the US-China trade conflict.
In America, surge is anticipated to speed down a bit, although remain firm enough for the Fed to remain on track for two rate lifts in 2018.
European factory surge was still sluggish in July, while Asian manufacturers demonstrated a loss of momentum.
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