China tariffs, NAFTA talks and Bitcoin plunge

Trump making headlines again on more embarrassing insider reports

US equity markets have been paring gains so far this week, on the back of the S&P 500 hitting new record highs, but they may be finding support with futures trading slightly in the green on Thursday.

This hasn’t been the most memorable week of the year so far, with it starting with a bank holiday in the US and major market news being few and far between. While Donald Trump has been making headlines again following the announcement of a new book from Bob Woodward and an article sourced from an anonymous official in the White House, both of which contain some embarrassing claims regarding the US President, none of this has had much impact on the markets even if they have drawn numerous angry Tweets.

The back end of the week promises to be far more interesting though, with the US jobs report being released on Friday – which always attracts the interest of investors – and attention once again falling on trade. Negotiations between the US and Canada are believed to have resumed on Wednesday in an attempt to overcome the differences that remain and end the often bitter and explosive talks.

DAX sinks to 5-month low, German factory orders slips

Investors eyeing potential Chinese tariffs as consultation period expires

Heading in the opposite direction are negotiations with China, with the consultation period expiring today, many are expecting Trump to announce a further 25% tariff on $200 billion of Chinese imports. This would represent a significant ramping up of the trade war between the world’s two largest economies and show the US electorate ahead of the mid-terms that he will not shy away from his strategy, regardless of the warnings against doing so.

Trump’s approach to reducing trade deficits has not been widely supported – to say the least – and it has made investors very nervous which has acted as a drag on markets so far this year. The S&P 500 may be back at record highs and the Dow not far behind but this is largely due to the tax cuts that were passed late last year which have massively boosted earnings in the opening two quarters and perhaps disguised the impact that Trump’s trade approach has had.

Trade and Tariff agenda dominate Thursday

Bitcoin plunges on reports that Goldman Sachs has postponed launching crypto desk

It’s been a rough 24 hours for the bitcoin and its peers, with reports that Goldman Sachs has postponed launching a cryptocurrency trading desk due to the uncertain regulatory landscape. This is a big blow for enthusiasts in the space as this would have been seen as evidence that big players in the financial world are finally taking it more seriously, with many – including JP Morgan CEO Jamie Dimon, among others – having ridiculed it in the past.

Bitcoin (CME) Daily Chart

Source – Thomson Reuters Eikon

Enthusiasts remain optimistic about the prospects for cryptocurrencies and see the launch of an ETF and the draw of institutional funds as being important for the next step, especially if the price is going to surpass its peak and reach some of the extraordinarily bullish highs that some are forecasting. The regulatory environment is going to be key to all of this and the fact that Goldman Sachs remains so concerned is clearly a blow. Whether it’s enough to send bitcoin below $6,000 where it’s found plenty of support this year, we’ll have to wait and see. At the moment, all we’re seeing is continued consolidation which has been the case for most of 2018.

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.