Published: Sun, June 17, 2018
Finance | By Cynthia Curry

Dollar and stocks drop as Trump hits China with tariffs

Dollar and stocks drop as Trump hits China with tariffs

The U.S. dollar edged lower against the Japanese yen on Friday, as President Donald Trump announced hefty tariffs on $50 billion of Chinese imports and Beijing threatened to respond in kind, raising tensions between the world's two largest economies.

The common currency shed 1.9% to the dollar after the rate comments, in its sharpest daily fall in the nearly two years since the Brexit vote shock in 2016.

The outlook for the Euro US Dollar (EUR/USD) exchange rate is now rather mixed, with the imminent rate decision liable to make or break demand depending on the revealed sentiment of the central bank.

In a rare merging of the sports and trading worlds, markets are gearing up for soccer's World Cup in Russian Federation, where time zone differences mean more matches during European, US and Latin American trading hours than any previous tournament.

The European Central Bank's Mario Draghi once again threaded the market needle with a policy statement that heralded the end of stimulatory bond purchases while deferring any interest rate rise until the second half of 2019. Short term rate forecasts were shifted marginally higher, with the median dot for this year indicating two more rate increases were on the cards, suggesting that the central bank is on course to hike again in September and then again in December.

"With the statement that key interest rates will remain at historically low levels until the summer of 2019, the European Central Bank has removed any fantasy of an earlier rate hike".

Federer's decision to skip Paris hurts tennis - Wilander
Nadal's introduction included a year-by-year accounting of every time he'd already won the French Open. The victory also allowed the 32-year-old Nadal to hold onto the No. 1 ranking, ahead of Federer.

Trump today announced tariffs of 25 percent targeting United States dollars 50 billion (43 billion euros) in Chinese imports from "industrially significant" technologies, making good on a pledge to punish the alleged theft of American intellectual property. Draghi said it would be "subject to incoming data", and that the European Central Bank would keep rates at record lows for "as long as necessary", with the aim of achieving 2% inflation over the medium term.

Andrew Milligan, head of global strategy at Aberdeen Standard Investments, said that in the context of trade flows, the sum of goods targeted was small. And in equity markets, the Stoxx600 turned positive on the news and had moved around 0.2 percent higher by 2.20 p.m. CET.

ASIA'S DAY: Japan's Nikkei 225 sank 1 percent to 22,738.61 while South Korea's Kospi plunged 1.8 percent 2,423.48.

The bank's bond-buying stimulus programme, also known as "quantitative easing" (QE) is credited with having helped the eurozone economy to recover from the region's financial crisis. That provided extra support for the notes, which have been boosted by more euro-friendly rhetoric from officials in Italy's newly formed government.

Oil prices were little changed as investors eyed a key Opec meeting in Vienna.

ENERGY: Benchmark U.S. crude added 23 cents to $66.87 per barrel in electronic trading on the New York Mercantile Exchange.

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