Trade war escalations between the US and China continued throughout Monday and the Chinese Yuan fell to the worst level seen since 2008, which certainly set alarm bells ringing. Clear risk off movement was seen and safe haven assets were sought such as gold, Japanese Yen and government bonds. Speculation of currency manipulation was rife and theories of China allowing its currency to depreciate as a response to President Trump’s recent tariff increase dominated headlines. It shows China's willingness to escalate matters and to not surrender to the U.S. The latest developments from China include instructing its state-owned companies to halt the buying of U.S agricultural goods. Many fear further escalations in the trade war may lead to another recession.
After last week’s under-estimate UK Construction PMI figures, focus sat with services PMI on Monday. Services PMI beat expectations with a reading of 51.4 from 50.4 expected. This positive result barely affected the falling GBP though. This morning the GBP was hit with bad news as the BRC (British Retail Consortium) showed UK shops suffered the worst July of consumer spending since the retail sales monitor began. The week ahead is light on UK economic data, but Friday will change that for the GBP with the release of manufacturing production and second-quarter growth figures. Whether these results are able to slow the GBP’s decline is yet to be seen, as at present any positive data is simply overshadowed by the possibility of a no deal.
GBP/USD traded sideways, opening at 1.2150, fell to lows of 1.2102 and closed at 1.2153.
GBP/EUR steadily fell as the day progressed. Opening at 1.094 and, closing at 1.081 its lowest level seen since late August 2017.
Eurozone data was mixed yesterday as it released its Services PMI figures. Italian and French Services PMI figures beat expectations with readings of 51.7 and 52.6, from 50.6 and 52.2 forecast. German and Spanish Services posted under forecast readings with 54.5 and 52.9 from 53.6 and 55.4 expected. The overall figure for Eurozone services showed a slight drop from the previous months 53.6 figure to 53.2. For now, the weakened USD is providing strength to the EUR and Monday saw the EUR climb against a host of currencies as a result. This morning saw German factory orders beat forecasts with a reading of 2.5% from 0.5% expected.
EUR/USD opened on Monday at 1.1108 and closed at 1.1231. This morning saw it climb to 1.2460 but fall slightly to 1.1201.