Yesterday's collapse in crude oil prices, along with the fall of stock indices in Europe and the possibility of further negatively affect investor sentiment amid the protracted trade conflict between China and the United States may further, which ultimately will have an impact or rather already reflected in the real dynamics of the world economy, which is experiencing great difficulties with growth.
The events of recent months clearly indicate that without reaching a compromise in the trade dispute between the Chinese and the Americans. The world economy will slow down in its growth, which in the future may lead to a new recession and economic crisis. Markets understand this and act on the basis of the logic of self-preservation, believing that the disputants will still have to agree. Indeed, everything is logical and correct but there are "but" that prevent it and can really be insurmountable, which can cause a new global economic crisis and complicated by the political opposition of countries.
The first and most important "but" is too energetic and even one can say that Donald Trump's brazen pressure on China. The States in his person does not just want to crush an economic rival but it seems to crush him politically. As they say, this is already a bust and can simply exclude any possible agreement. The internal political confrontation of the US President with his opponents in the country pushes him to take radical and simply extremist actions on the outer contour, which will impede the achievement of a compromise. The desire of the opposing sides in an economic dispute to save face is a very important obstacle.
In our opinion, investors' hopes may not be justified. There were too many events in history that seemed insignificant at first, illogical and simply wrong, but ultimately led to dire economic consequences and even wars.
Investors are still hoping for common sense, which is why we don't see the hardest collapse in world markets, which so far are simply balancing. While it is difficult to say how it will end, But the consequences can really be unpredictable and very difficult. The crisis of 2008 may seem like flowers in this situation but the berries can be bitter.
Forecast of the day:
The EUR/USD pair seems to be trading again in the range. Investors are not yet ready to drive her to the floor amid hopes that the Fed will still have to start lowering rates this year. The pair is trading above the level of 1.1185 and may continue the local upward trend to 1.1260.
The USD/CAD pair has been trading since the end of April in the range 1.3370-1.3500. An attempt to restore oil prices may lead to a decrease in the pair to the lower limit of the range at 1.3370.
