Trade war tactics

​​​​​​Today's news headlines:

  • ‘Johnson lays ground for "people vs Parliament" election'. Far from contrite after his Supreme Court loss, Boris Johnson outright dared opposition parties to call a no-confidence vote and earn the retribution of the electorate for their obstruction of Brexit. While he's weakened in some sense, it's far from clear the ruling has impeded Johnson's ability to push through Brexit. (Financial Times)
  • 'House launches Trump impeachment inquiry'. Donald Trump has released his call with Ukrainian President, Volodymyr Zelensky, in the run-up to the 2016 US election. It is unprecedented for a President to ask a foreign government official to investigate a political rival. According to the Department of Justice, that does not constitute illegal activity. The problem is that their ruling was not aware of aid withheld prior to the meeting, adding a strong quid pro quo element to the communication which is potentially illegal and impeachable. (Financial Times)

Mixed bag

Yesterday, US President Donald Trump claimed once again that a trade deal between the US and China is close and there’s a good chance it will get done. However, action taken by Trump’s administration risks aggravating future trade talks. Overnight, news emerged that the US will ramp up sanctions against Chinese companies who are shipping Iranian oil. While both parties of the trade war have claimed top officials are ready for serious negotiations next month, analysts believe China will not be bullied into the hands of the US. Retaliation isn’t a foregone conclusion, but it’s believed Chinese shipping patterns won’t change much following the sanctions.

Elsewhere, other trade frictions involving the US are showing signs of improvement. Yesterday, Trump and Japanese PM, Shinzo Abe, agreed on a trade deal to cut tariffs on both sides of the trade channel. Trump reassured further talks would occur to remove existing tariffs on Japanese cars, and previous threats of national security tariffs on Japanese car imports will not be acted on.

Bottom line: Developments in US trade frictions paint a mixed picture about the future of global trade, but it’s likely the US-China story will have the biggest impact on global economic health. With the US elections next year, it’s likely that Trump will try to tactically play the US-China trade war to better position himself for re-election in 2020.


Yesterday a big Dollar rally drove Sterling lower and pushed the pair decisively below the 100-day moving average. The risk-off tone has continued into today's open following the impeachment affair, despite the overnight development on the trade front. Today is another quiet day for data, but there are a number of Fed speakers this afternoon.


Both the Euro and the Pound lost ground to the Dollar yesterday. On net, Sterling was the bigger loser, and the pair clearly broke below the 200-day moving average which had acted as Sterling support for the past week or more. Both Mario Draghi and Mark Carney will be making comments at the European Systemic Risk Board annual conference in Frankfurt.


Given the move up on the Dollar and loss on the common currency, it isn't surprising the pair is sitting at May 2017 lows. It seems like we are firmly in the middle of the 2015 – 2017 trading ranges that spanned 1.0400 – 1.1500. The Dollar Index is sitting at two-year highs so a continued slide in EUR/USD will likely need to stem from Euro pessimism, rather than an already strong US Dollar safe-haven effect.

All content is written by the Global Reach Trading Desk. The opinions expressed are not the view of Global Reach Group and are not intended as investment advice.