It seems that this week was no short of surprises, first we had the Fed who found a way to disappoint the market and that sent the dollar towards the sky and stock markets suffered from a dramatic loss. If this was not enough, Donald Trump took the markets by a complete surprise by throwing another sucker punch by announcing his new decision on China. President Trump announced to levy 10% tariffs on rest of the $300 billion of Chinese good starting from September. This news was enough to break the back of the markets and the S&P 500 futures tanked on the back of this news.
US futures and European markets are in a massive turmoil as a result of new tariffs announced by Donald Trump. This has come at a time when a large number of market participants were expecting a cease fire between the US and China. However, this option is out of the window and everyone is worried about one thing: the retaliation. China isn’t going to sit on its hands and going to take the slap quietly, this isn’t Iran or other similar countries. The second biggest economy of the world is going to hit back, and this time it could be such an upper hook that it may take the floor out of its opponent’s feet.
From investors and central bankers’ perspective, this situation has escalated their problems. As a result, investors are going to move on the side lines, they were hardly getting their confidence back due to the earning season. It wasn’t as bad as expected. Central banks have their own qualm with the slower economic growth. The economic data has been immensely sick since this trade war started. They thought that renewal of dovish stance may cure this curse and restore confidence or at least they have some hopes around placebo effect.
Nonetheless, if you are a bull, it is time to run for the hills because the hell is about to break. The chances of ceasefire are out of the window and central banks can really cancel their summer plans. From now, expect central bankers to be on their toes and this means they will use every single tool in their bag to fight the effects of this decision.
The Fed can forget what they said this week because now I am looking at a string of interest rate cuts and this means weaker dollar.
Gold price has already experienced a massive spike overnight and the chances of it tearing the resistance of 1,500 are robust.
Stock traders can throw their hopes that Q3 earning season is going to be a bright one, the upcoming ultra-dovish monetary policy stance by Fed may provide an initial support for the markets but it would not have any real effects.
Over in Europe, German’s manufacturing sector has been in chaos through out this year, the economic readings have flirted with recession level and this escalation of war is going to make the nights sleepless for the president of the European Central Bank who is already short on remedies.
From a risk off perspective, Bitcoin price surged overnight as HODLERs clearly see that how Donald Trump is destroying the status of the dollar. Picking a fight with China means abolish the importance of the dollar on the global stage. There are already strong rumours that something robust is about to come out of China which is going to support the price of Bitcoin.
These levies and any future levies are going to push the Chinese regulators to start thinking seriously to adopt Bitcoin. Believe me that the day China lifts the ban on Bitcoin and supports this new currency with their supreme regulation, Bitcoin is going to crush the $100,000 mark in no time.
