The US Treasury accused the Chinese of currency manipulation last night, after the yuan dropped beneath the key 7 per dollar level yesterday. The trade war between the two powerhouse economies caused a global economic fall in Monday’s trading, as fears mount that the clash could damage US economic expansion.
US Treasury secretary, Steven Mnuchin stated the government had determined the Chinese were manipulating their currency and that Washington would engage with the International Monetary Fund to try and resolve the situation.
Monday’s sharp weakening in the Chinese currency came after U.S. President Donald Trump unexpectedly announced fresh tariffs on Beijing last week, after it was reported the Chinese failed to honour their agreement to buy US agricultural goods. Risk markets sold off and investors turned to safe havens once again, with the Japanese yen, Swiss franc and gold all moving higher in value.
This latest move pushes the trade war into uncharted territory, placing fresh doubt over whether a trade deal can be reached and increases the chance of a global recession.
In other news the Royal Bank of Australia (RBA) kept interest rates on hold at 1% at their latest policy meeting, the first time they have done so in three months. Governor Philip Lowe stated that whilst the outlook was stable, there are still growing concerns from the ongoing trade disputes and that risks to the global economy remain on the downside.
Australia has been one of the countries to suffer the most due to the Sino-US trade war, as China is their primary export market, worth over A$110bn a year. However, despite the challenging conditions, Australia printed a record A$8bn trade surplus in June.
In the UK, service sector PMI data printed above forecast at 51.4, up from the previous month of 50.2. However, despite this positive reading, average retail sales data over the year to July rose by 0.5%, a record low according to the British Retail Consortium. Low real wage growth and Brexit uncertainty were cited as the primary reasons for the poor reading.
Today saw German factory orders data print at 7am, significantly higher at 2.5% against the forecast 0.5%. US Jolts jobs data follows at 3pm.
Trade Tensions Affect Global Market
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