ANGELA MERKEL MAKES A MAJOR WARNING ON GLOBAL TRADE
Germany Chancellor Angela Merkel sounded an alarm of protectionist trade policies today. In a speech, she said that the ongoing trade issues risked thrusting the global economy towards the largest financial crisis since the 2008/9 crisis. In recent months, governments and investors around the world have been strategizing on how to deal with a full-blown trade war. This comes after the recent decisions by the US president to place tariffs on steel and aluminium imports. He is also considering additional retaliatory tariffs for countries that retaliate on his tariffs. As part of the ongoing trade crisis, Micron – an American chip company – was banned from operating in China. In addition, Chinese tariffs on $34 billion worth of US goods will kick off on Midnight Friday.
The pound was little moved today even after the positive services PMI numbers. The numbers showed that the PMI in June increased to 55.1, which was higher than the expected 53.9. This was also the highest level for the PMI since November last year. It is an indication that the services sector is doing well amidst the troubles of Brexit and trade. In addition, the data from IHS Markit suggests that the economy expanded by 0.4% in the second quarter, which is higher than the 0.2% reported in the first quarter. An acceleration in the second quarter growth and an increase in inflation means that the BOE will hike interest rates by the end of the year.
The Australian dollar erased gains made earlier today after the country reported better-than-expected retail sales data. The data from the Australian Bureau of Statistics (ABS) showed that the retail sales in the month of May increased by 0.4%, which was better than the expected 0.3% increase. However, the number was less than April’s retail sales increase of 0.5%. As the world adjusts to the current trade conflicts, traders will continue to focus on retail sales because they are a good indicator of consumer confidence in the economy.
The EUR/USD pair is currently trading at 1.1637, which is an important support level as shown below. It is also at the bottom band of the Bollinger Bands. At this point, the pair is trying to break the support but is finding some resistance. If the pair is successful in breaking the support, traders should watch out for it to test the 1.1590 support. However, since it is in the lower band of the Bollinger Bands, the pair could move to the 1.1650 level, which is also the middle band.
Yesterday, gold started a rally after reaching the lowest level since November last year. Today, gold continued the upward momentum as traders continued to buy a metal they believe has been oversold. The XAU/USD pair is currently trading at $1255. The level is higher than the 50-day moving average and slightly lower than the 25-day moving average. The pair has dropped from its intraday high as bulls took profit. The upward momentum is likely to continue as traders bet on a resurgence in an oversold commodity.
Yesterday, the GBP/USD pair crossed the major resistance level of 1.3180. Today, the pair traded sideways above the resistance level and is now trading at another resistance level of 1.3210. The pair is likely to continue trading in this range as traders wait for tomorrow’s Fed minutes and job numbers from the United States.