Good morning,

USD: Gloves are off

Trump’s plan backfired spectacularly yesterday as China dished out their own $60 billion worth of US tariffs. China is now targeting US agricultural goods, reducing its aircraft orders through Boeing, liquefied natural gas, etc. – the list goes on. The dollar suffered initially during yesterday’s trading before a strong rally as the US markets joined the party. Trading conditions were extremely erratic and the fallout radiation can impact any of the G10 currencies without warning.

US stocks suffered their biggest fall in 2019, with the S&P500 dropping 2.4% and tech-focused NASDAQ falling 3.4%. The same occurred throughout Asia, with the yen and Japanese equities hitting four-month lows.

Trump has now warned that he will impose a further 25% tariff on an additional $300 billion worth of Chinese imports. He received prompt criticism from rural Republicans that this will only bring further misery to the US; in particular, the agricultural and farming sectors that have given him so much support during his election campaign.

There is no clear path from here to de-escalate the situation and it will continue to be the theme of the week.

GBP: Wage data to help bolster Pound buyers

Sterling has now recorded it’s sixth consecutive daily loss against the euro, alongside a plummeting GBPUSD which is heading for a sub-1.29 print as we speak.

Forecasters are looking for a print of 3.4% in wage growth, which will feed back into the Bank of England’s overall strategy for interest rates. The UK economy is the only real positive when it comes to analysing the pound, and a print above 3.4% will relay the message that wages are growing at a consistent rate, tracking rising inflation.

The euro continues to receive a boost from the risk escalation and is proving too strong for the pound. Beyond current levels, we have 1.10 and 1.13 as key support prices.

Have a great day.