Markets turned heavily negative Friday, when it was announced that tariffs would be imposed on Canada, Mexico and China, beginning Saturday the 1st day of February. The trade wars may have already begun, and this is exactly what markets were fearing. US equity markets plunged into negative territory while the safety of the US Dollar was sought. Earlier the US PCE inflation indicator confirmed that inflation was back on the rise in the USA, and market fears of tariffs increasing upward pressure on inflation, would only exasperate the problem. Trump asserts that the overall economic plan, will ensure that inflation is lower under his policies, as energy prices are set to tumble and cut inflationary pressures economy-wide. Markets will most likely remain weak, coming into the new month of February. The rise in the US Dollar pushed the EUR back to 1.0350, while the GBP dropped back below 1.2400.The rising reserve will put downward pressure on commodity currencies, with the AUD heading back towards 0.6200, while the NZD slipped to 0.5630. This coming week will focus on the US labour markets, with a series of employment reports, culminating in Friday’s Non-Farm Payrolls. NZ will also release Unemployment data, and it is expected that these will not be a strong number, in either the USSA or New Zealand. Trade wars will not help any nation, but will probably be only temporary, as one nation after the next caves to pressure from the Big Dog.
