Arrangements, collapse in Germany and data from the USA

28 באוג׳ 2019

The China-United States Trade War is an ongoing economic conflict between the world's two largest economies. Two countries cannot even agree if they are talking. According to Trump, he got a call from Chinese officials, however, China did not confirm that yet. Well, quite possible that there was no call. this means that we are in a situation where the parties are in the active phase of the confrontation. In the light, we will continue to look for points to buy for safe-haven assets (the Japanese yen in the foreign exchange market and gold in the commodity market).

Yesterday extremely weak data on the business climate in the largest economy of the Eurozone came out, today German GDP in the second quarter fell by 0.1%. Another quarter with a minus mark and the recession will be announced officially. Recall recession is a period of general economic decline, defined usually as a contraction in the GDP for six months (two consecutive quarters) or longer. An extremely alarming signal was the decline in German GDP mainly due to a sharp drop in the country's exports (it took 0.5% of GDP growth, actually leading it into the negative zone). This is an example of how the trade war could hurt.

This news confirmed our recommendation to avoid buying euros. Instead, we suggest selling the euro against the Japanese yen and the British pound. This trading idea this week works just great.

As for the dollar, not everything is that simple. Yesterday's data on orders for durable goods, consumer confidence and business activity in the US came out better than expected, which suggests that the US economy is getting better. But, our position on the dollar is unchanged - we are looking for points for its sales. First of all, against the pound and the Japanese yen. Also, on Thursday, revised data on US GDP for the second quarter will be published. Weak data may trigger a short dollar.