The financial market was caught off-guard by a Trump tweet that warned of additional tariffs on Chinese goods. Yesterday, the President said that the 25% tariffs threat to Chinese goods will come this Friday. This came at a time when investors were waiting for a deal between the two countries to be signed soon. In response to the tweet, the US dollar declined against major currencies, Asian stocks fell, and crude oil declined by more than 2% in early trading.
The euro moved lower against the USD ahead of key data expected today. The EU will release its retail sales for the month of March. This data is expected to show an increase of 1.8%, which will be lower than the 2.8% growth in February. The Markit composite PMI is expected to remain unchanged at 51.3. In Germany, the services and composite PMI numbers are expected to remain unchanged at 55.6 and 52.1 respectively. In Italy, the services PMI is expected to increase to 54.4 from the previous 53.1.
The Australian dollar declined sharply after Trump threatened to increase tariffs on Chinese goods and ahead of the RBA decision expected tomorrow. The RBA is expected to leave rates unchanged at the current 1.50%. This decision will give investors an insight into what the RBA thinks about the economy and whether it will change its decision on rate hikes later this year.
The EUR/USD pair declined in the Asian session after Trump’s threat on tariffs. The pair reached a low of 1.1170 from Friday’s close of 1.1205. It then pared some of those gains. On the hourly chart, the pair’s price is between the middle and upper line of the Bollinger Bands while the RSI has remained unchanged at the current level of 54. Today, the pair could remain along these levels as traders wait for more guidance on trade.
Sterling jumped sharply against the USD after the Trump announcement. It rose from a low of 1.2988 to a high of 1.3175. On the four-hour chart, the price is slightly below the upper line of the Bollinger Bands, while the RSI has dropped slightly from above 70 to the current level of 63. The dot of the Parabolic SAR indicator remains at the lower side. The pair will likely resume the upward trend and test the 1.3200 level.
The AUD/USD pair declined to a low of 0.6962 after the Trump tweet and ahead of the RBA decision. This was the lowest level since January 7. On the four-hour chart, the price is below the 25-day and 50-day moving averages, while the RSI has moved closer to the oversold level of 30. The Accumulation/Distribution indicator has started to move up. There is a possibility that the pair will drop further ahead of the RBA decision.