The U.S. Dollar is back to gaining ground after news of yet another round of tariffs to be imposed on China. White House and trade officials explained that China is simply not playing fair and has ignored previous warnings against its behavior.
Accusations of currency manipulation and unfair practices are nothing new, but the size of $200.0 billion of additional tariffs certainly affects the global growth outlook. Retaliation also needs to be considered. This in turn is making the greenback a safe-haven and crushing commodities.
Asian as well as European markets were all in the red as tensions sparked at the start of the NATO Summit where presently trade concerns and global security woes are being discussed. Stock indexes are awaiting profit reports and with mostly positive estimates, the buck and equities could continue to appreciate in tandem.
The brunt of trade worries is being felt by all other currencies, especially resource-based, on the spectrum. At the time of writing, the dollar started falling as a result of better than expected Producer Price Index figures that suggests inflation could go up rapidly along with tariffs, which are expected to push up prices and production costs.
The Euro recovered in the morning after falling on Tuesday based on less long-term bets based on potential interest rate hikes. Throughout the night, downward Euro pressure has been caused by a gloomy ZEW Economic Sentiment survey out of Germany that was way below expectations as business leaders addressed loss of confidence in global political stability. Nevertheless, we can see reason for swings as we foresee July to be a recovery month for the common currency against the dollar.
The Pound has not found definite direction after a slew of changes in the political situation of Britain. Cabinet members have been replaced and Prime Minister Theresa May plans to release a white paper on Thursday describing the details of the Brexit approach and goals moving forward in negotiations.
Sterling does not have much to celebrate as the reading of Gross Domestic Product and Industrial Output concluded that there were months of contraction in the last quarter, which brought the average level of growth down. Economic struggles certainly do not help in uplifting GBP anytime soon.