23 July 2018 ( Lagos ) : Trump accused China and the E.U. of manipulating their currencies to gain a competitive edge over the U.S.; in fact, the real reason for the Dollar’s appreciation until now is that the U.S. economy is outperforming its peers. This is not because other countries are pushing down their currencies, but because of Trump’s fiscal and trade policies. 

If it becomes evident that the current trade war is shifting towards a currency war, expect risk assets to tumble heavily - investors need to keep a close eye for such developments. Going forward, the Yuan will be a key currency to watch as a break above 6.8 will draw more criticism to China and the way they are managing their currency.

The European Central Bank is meeting on Thursday. After announcing on 14 June their plans to end the stimulus program by the end of this year, we don’t expect to see a significant change in policy and therefore no surprises on this front. What will be more interesting is how the ECB assesses the latest development in trade tensions and whether President Draghi responds to Trump’s criticisms of currency manipulation.

Source: Hussein Sayed, Chief Market Strategist at FXTM

Reporting for EasyKobo on Monday, 23 July 2018 in Lagos, Nigeria