US Piles on More Tariffs, UK Conservative Party Loses Seat in Parliament

Just another sunny Friday in Canada, whilst the Tweeter in Chief is adding more tariffs on Chinese goods, and Boris Johnson took an early hit to his majority.

Xe Corporate

August 2, 2019 4 min read


  • The US President surprised the business community, stock and currency markets by escalating tariffs on Chinese goods

  • The UK Conservative Party majority is now down to one seat after pro-EU Liberal Democrat Jane Dodds defeats Chris Davies

  • Canadian dollar down to a two-month low as oil prices continue to sink


The US Treasury surprised the market after announcing new taxes on Chinese imports. This move comes at a time when officials from both sides were apparently applying finishing touches after completing 90% of a trade arrangement. The element of known unknown has again pushed the greenback lower in the overnight session with traditional safe-haven currencies attracting flows. The Japanese Yen has strengthened nearly 2%, gold gained 3.5% whilst oil futures petered out 6.5% to a two-month low on concerns of a global economic slowdown.


US Non-farm payroll numbers came in line with market estimates, rising 164 thousand in July and confirming the Fed outlook of a strong domestic economy but facing trade-related external uncertainties. We expect the market to keep an eye on the Twittersphere for aftermath shocks and on US President’s speech on “Trade with the EU” later this afternoon.


Boris Johnson has been the Prime Minister for about ten days, and already a by-election has taken a large bite out of his power in parliament. Pro-remainer Liberal Jane Dodds was victorious over Conservative Pro-Brexit incumbent Chris Davies.

It came as no surprise to the market when the UK construction sector output fell again in July. It confirms a decline for the third month in a row with new orders drying up as a result of the ongoing political uncertainty. The PMI reading was at 45.3, below market consensus estimate and business confidence is now at its lowest level since November 2012. The pound is holding onto tiny gains, but the near-term outlook remains bearish.


The euro is trading higher as we enter the final session of the week. EUR/USD went through a sequence of choppy moves and now see a rebound after the US Administration decided to slap another 10% tariffs on Chinese products. Better sales numbers coming out of the euro bloc supplied some support to the shared currency. The volume of retail trade recorded a monthly jump of 1.1% in June and was up 2.6% when compared to the same month of last year. We expect further upsides to be limited and the focus will be on President Trump’s speech on the US-EU trade relationship.


The Canadian dollar declined to a two-month low versus the greenback and is tracking the poor performance in the oil futures market. WTI oil plunged 6.5% after the US Administration indicated that it will apply a new 10% tariff on imports from China. The flare-up in trade tension is likely to affect business investment decisions, consumer spending and overall global growth. We expect USD/CAD to remain choppy around the mid-point of 1.3200.


The Australian dollar is on a losing skid, its longest downward spiral since 2015. AUD USD touched a low of 0.67732 and recovered slightly to 0.67872. President Trump's import taxes on Chinese goods likely won't help the cause of the Aussie at this point.


The currency market went into a panic mode after US President Trump indicated that the administration is ready to impose a 10% tariff on an additional $300 billion in Chinese products and it could very well get messier. USD/JPY fell overnight nearly 2% following the announcement. Renewed trade tensions and safe-haven flows are expected to keep the Yen strong.

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