Trade and Political concerns

The US will implement a 25% tariff on $50bn worth of imports from China, and China, in swift response, said it would impose a similar scale of tariffs on US imports. After heavy losses on the ECB meeting, EUR/USD recovered slightly, up from 1.1540 to 1.1620 but started this week trading a little softer. GBP/USD was on the rebound on Friday while USD/JPY ranged sideways between 110.40 and 110.90. Heading into Europe session, we have a data-empty event calendar, except for the German Bundesbank monthly economic report, which is likely to have virtually no impact on the EUR markets. In the US session, the second-liner US NAHB housing market index will be reported ahead of the central bankers’ speech.

EUR/USD is still consolidating around the 1.16 level following last week’s significant drop on ECB’s dovish rate guidance. The escalating US-China trade tensions and Merkel-Bavarian row on migrant crisis could only bolster the bearish technical setup. The European Central Bank President Draghi will deliver opening remarks at the ECB Forum on Central Banking in Sintra, Portugal, scheduled from June 18 to June 20. The common currency will likely run into fresh offers if Draghi reiterates ECB’s dovish stance.

Escalating US-China trade tensions and the resulting risk aversion in stocks seems to have put a bid under the JPY. As the risk assets are under pressure and the flight to safety could continue in Europe and North American session, might send the anti-risk JPY to fresh daily highs across the board.

The GBP/USD is flat for Monday, sifting just beneath Friday’s close near 1.3270. The first half of this week is shaping up to be a quiet affair for the Sterling, with little of note on the economic calendar until the Bank of England’s (BoE) next rate decision due on Thursday. The BoE is widely expected to stand pat on rates for now, and previous market expectations for a rate hike sometime in the fourth quarter are looking far-fetched as economic data for the UK resumes missing expectations. This Thursday is widely expected to see the BoE remain on hold and keep the interest rate at 0.5%.

Oil prices dropped more than $2/barrel on Friday after Russia and Saudi Arabia confirmed a production increase. OPEC members along with its oil allies will meet in Vienna on Friday and Saturday this week to review the efficiency of their production agreement. All the while President Trump is applying added political pressure for a production hike, although the producers have vastly differing opinions to this request.

Gold fell to fresh 2018 low of $1,275 on Friday, with the demand for the metal weakened. Gold is trading marginally higher this morning, at $1,280.11.