Demand for safe-haven assets is up as Washington and Beijing imposed additional tariffs on each other’s exports, adding to the gloom hanging over the global economic outlook.
The US slapped 15 per cent tariffs on a variety of Chinese goods on Sunday, 1 September, including footwear, smart watches and flat-panel televisions. China, in turn, introduced 5 per cent duties on US crude oil. This is the first time fuel has been targeted since the world’s two largest economies started a trade war more than a year ago.
US President Donald Trump said the two sides would still meet for talks later this month, but there is little hope for a resolution to the escalating trade war.
Gold, which like the Yen finds favour in uncertain times, rose this morning, 2 September by 0.39 per cent to $1,525.25 per ounce, the most in almost a week, as investors were drawn to so-called risk-off trades. Declines in Asian shares also showed investors steering away from risk. This sentiment could take a further hit from ongoing protests in Hong Kong.
The Euro stands at $1.0992 this morning, which tumbled on Friday to its lowest in more than two years.
German Chancellor Angela Merkel’s Christian Democratic Union (CDU) and her coalition partners held off a surge in far right support in two state elections in eastern Germany on Sunday.
The result averted an immediate political crisis in Europe’s largest economy. However, the expectation that the European Central Bank (ECB) could cut interest rates at its next monetary policy meeting on 12 September, which could weigh on the Euro, is high.
In the UK, Boris Johnson has dramatically escalated the Tories’ civil war on Brexit by threatening to purge some of the Conservative Party’s biggest names unless they back him in a key vote, and his tough line, tomorrow, 3 September.
Foreign exchange trading could be subdued today as US financial markets are closed for the Labour Day holiday, but choppy trading is inevitable during the week, with the House of Commons due to return from recess tomorrow.
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