Daily Analysis - 11/07/2018
The US – China trade war has been escalated a notch higher after the US administration released a list of additional items proposed to be subject to a total of about $200 billion in imports from China. These fresh headlines has hit sentiment negatively as risk is back off. The Asian markets fell, as did European markets, which are under pressure in the open of trading this morning. Commodities were affected, with copper down 3% and the Australian dollar was the worst FX performer.
The switch in risk sentiment has seen a knee jerk reaction in the Australian dollar, which tends to falls when risk is off and given the fact that China is a large trading partner of Australia. AUDUSD is down over 50 pips from the US close to early European trading, coming close to the key 0.7400 level.
Things got ugly with copper as trade war concerns resurfaced and hit commodities hard. Copper is a good bellwether for the global economy as well. The July futures contract fell to test the key 2.73 level this morning, with further downside expected.
The Bank of Canada is widely expected to raise interest rates at its monetary policy meeting today to 1.50% from 1.25%. However, BOC Governor Mark Carney’s press conference will be more important to watch and any dovish undertones in his comments with respect to trade could be negative for the loonie. USDCAD has been moving higher this week, to trade in the $1.31 handle.
