The past week showed investors again that the situation of uncertainty and tension in the world markets will continue.
Last week, investors have been anxiously awaiting the speech of J. Powell, head of the Fed, at the Jackson Hole Economic Symposium, in the hope that he will make it clear that the Federal Reserve will not be indifferent and will not just watch the beginning of the trade "massacre" between the US and China, and will continue the process of lowering interest rate, and everything would be fine. However, the head of the American Central Bank, although he directly said that rates would continue to decrease, said that measures would be taken to support the national economy.
The markets took his words with optimism, and the dollar, especially paired with the European currency, began to decline, but all this "joy" did not last long. News from China that it will act in a mirror manner in the trade war with America, raising customs duties from two stages in September and December, cooled the positive mood of the markets. Also, the traditional message from D. Trump on Twitter that the United States will take additional measures of a tariff war with Beijing, unfolded market sentiment a hundred and eighty degrees. This change of mood led to a landslide drop in US stock indices, which today on Monday, has continued at the Asian trading.
Assessing the impact of another wave of negative on the markets, noting that it does not bode well. If the Fed slows down with an energetic decline in interest rates, then the fall in US stock indices will continue and may turn into an uncontrolled collapse. In this wave, prices for protective assets will only rise. Gold, government bonds of economically developed countries, as well as from the currencies of the Japanese yen and the Swiss franc will be in demand. And perhaps even the American dollar, which is only gaining support in a situation of uncertainty due to its function as a global reserve currency.
This week, it will be important to publish the next release of US GDP data for the second quarter. It is expected to reduce the growth rate to 2.0% from 2.1%. This dynamics is unlikely to please the Fed, and if the growth is even less, then the regulator simply will not have any obstacles in order not to start a cycle of lowering interest rates. It is hard to say how the market will react to this likely development of events, since the negative impact of the US trade war with China is too great. It may even happen that measures to cut down the cost of borrowing will simply not be enough, not only for the growth of the local stock market, but in general for its stabilization.
Forecast of the day:
The USDJPY pair is trading above the strong support level of 105.00-05 in the wake of rising demand for defensive assets amid another escalation of the trade war between the US and China last week. If the pair falls below this level, then we should expect its fall to 104.00.
The price of gold soared upwards in the wake of the aggravation of trade contradictions between Washington and Beijing. It can be adjusted to the level of 1533.40, but if this level persists, we should expect resumption of price growth to 1575.00.
