President Trump warned that he would impose tariffs on the remainder of Chinese exports from September.

US ISM manufacturing data was slightly weaker than expected which initially hampered the dollar.

Risk appetite deteriorated sharply after President Trump warned that he would impose tariffs on the remainder of Chinese exports from September.

US bond yields moved sharply lower and the dollar lost ground as US economic fears increased once again with USD/JPY sliding to 5-week lows.

Equity markets also registered significant losses as trade fears intensified.

Oil prices came under heavy pressure as demand fears escalated. After initial vulnerability, gold moved sharply higher on USD/JPY losses and risk aversion.

Sterling was little changed after a mixed Bank of England policy meeting with underlying negative sentiment persisting.

Market volatility spiked after the European close following President Trump’s announcement that he would impose a 10% tariff on all remaining Chinese exports from September 1st. As the dollar lost ground, EUR/USD recovered further to the 1.1090 area and the dollar remained weaker on Friday as trade fears overshadowed employment data due later in the day.

The UK PMI manufacturing index held at 48.0 for July and was slightly above consensus forecasts, but equalled the lowest figure since February 2013. Production declined at the fastest pace for seven years while orders fell further. Brexit uncertainty continued to sap confidence and, from a long-term view, a re-routing of supply chains away from the UK will be damaging.

The Bank of England held interest rates at 0.75% with a 9-0 vote, in line with market expectations. The central bank maintained its view that limited and gradual increases in interest rates would be appropriate in the event of a smooth Brexit, although some recovery in global growth would also be needed while the impact of Brexit uncertainty had become more entrenched. There was a downgrading of near-term GDP growth forecasts while inflation forecasts were slightly higher.

GBP/USD recovered from below 1.2100, but gains faded quickly while Moody’s warned that increased government spending could increase credit-rating vulnerability. GBP/EUR made net gains to around 1.0990 after the government also lost a by-election which cut the working majority to one and reinforced political uncertainty.

Economic Calendar

07:30CHF CPI (M/M)(JUL)-0.30%0.00%
07:30CHF CPI (Y/Y)(JUL)0.50%0.60%
08:30CHF SVME PMI(JUL)46.5%47.7%
09:00Industrial Output MM SA(JUN)-0.40%0.90%
09:00Industrial Output YY WDA(JUN)--0.70%
09:30GBP PMI Construction(JUL)4643.1
10:00Euro-Zone PPI (M/M)(JUN)-0.40%-0.10%
10:00Euro-Zone PPI (Y/Y)(JUN)0.80%1.60%
10:00Euro - Zone Retail Sales (M/M)(JUN)0.30%-0.30%
10:00Euro - Zone Retail Sales (Y/Y)(JUN)1.60%1.30%
13:30USD Average Hourly Earnings (M/M)(JUL)0.20%0.20%
13:30USD Average Hourly Earnings (Y/Y)(JUL)3.20%3.10%
13:30USD Non-farm Payrolls(M/M)(JUL)170K224K
13:30USD Private Nonfarm Payrolls (JUL)150K191K
13:30USD Trade Balance(JUN)-54.80B-55.50B
13:30United States Unemployment Rate(M/M)(JUL)3.70%3.70%
13:30CAD Trade Balance(JUN)-1.50B0.76B
15:00USD Michigan Consumer Sentiment(JUL 01)98.498.4
15:00USD Factory Orders(JUN)0.80%-0.70%
18:00USD Baker Hughes US Oil Count--

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.