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Trade Fears Hold Major Currencies in the Red; Loonie Weakens as NAFTA Deadline Looms

Here are the latest developments in global markets:

FOREX: Trump’s stubborn stance the previous day aiming to enhance US’s trade protective measures against China and keep the pressure on the EU, shifted funds away from riskier assets, pushing dollar/yen down to 110.78 (-0.16%) and dollar/franc to 0.9666 (-0.23%). The dollar index, which is set to close in the red for the third consecutive week , was also declining but marginally, last seen at 94.68 (-0.04%) as the euro and the pound felt the trade pain as well. Euro/dollar inched down to 1.1647 after Eurozone’s flash CPI figures for the month of August were slightly lower than expected, while the President of the European Commission, Jean-Claude Junker expressed his hope that the ceasefire with the US on trade will continue. Pound/dollar crossed below the 1.30 level to touch 1.2990 (-0.13%) despite the EU reiterating its intention to avoid a hard Irish border. Euro/pound stood lower at 0.8960 (-0.09%). Dollar/loonie was the best performer, trading higher at 1.3006 (+0.19%) ahead of a NAFTA deadline later today and after GDP growth readings out of Canada disappointed. In the antipodean space, aussie/dollar and kiwi/dollar were posting sharper losses, with the former standing at 0.7226 (-0.51%) and the latter at 0.6631 (-0.36%). The Indonesian rupiah dived to 14,730 per dollar, a level never seen since the 1998 crisis, on the face of the EM sell-off. The Indian rupee tumbled to a record low of 71 per dollar earlier in the day, while the Turkish lira managed to rebound to 6.58 per dollar (+1.13%) after reaching a two week low of 6.39 per dollar on Thursday.

STOCKS: European stocks were in a sea of red for the second day on renewed trade threats. The pan-European STOXX 600 and the blue-chip Euro STOXX 50 were losing 0.70% and 0.77% respectively. The German DAX 30 declined by 0.98% at 1030 GMT, the Italian FTSE MIB retreated by 0.80%, while the French CAC was the worst performer, diving by 1.2%. The British FTSE 100 was also on the backfoot, being down by 0.47%. Futures tracking US indices such as the S&P 500, Dow Jones and Nasdaq 100 were in negative territory as well, pointing to a marginally lower open today.

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COMMODITIES: Crude oil prices reversed lower after reaching fresh peaks on Thursday, with WTI crude dropping to $69.73/barrel (-0.74%) and Brent slipping to $77.19 (-0.75%). The weakness appeared as investors feared that the ongoing global trade war could negatively affect demand for oil, though concerns about supply tightening on the back of renewed US sanctions on Iran limited steeper declines in crude prices. In precious metals, dollar-denominated gold had fully recovered yesterday’s decline, bouncing back towards 1,206.20 (+0.56%).

Day ahead: Trade developments including NAFTA and Brexit to make headlines; Chicago PMI & final University of Michigan Economic Sentiment Index pending

Friday’s economic calendar will get lighter later in the day, with the Chicago PMI and the University of Michigan Consumer Sentiment index out of the US being in focus. Still, any developments on the trade front as well as Brexit could prove of more interest as uncertainty around the topics keeps investors on their toes. Emerging markets will be closely watched given the recent collapse of the Argentinian peso and the Turkish lira’s free fall.

At 1345 GMT, PMI figures out of Chicago, which is a home to some of the largest US companies, are expected to show that manufacturing activity in the region has slowed down in August, driving the corresponding index lower from 65.5 to 63.0. However, t