Second Quarter Kicks Off with Trade Tensions Escalating


The United States Dollar Index lost more than 2% of its value in the first quarter of 2018, marking its fifth straight quarter of declines. Positive sentiment from the global economy, and the inflationary phase priced in by the market, are weighing on the US dollar. China started the new quarter by imposing new tariffs on 128 American products in response to US duties on imports of aluminum and steel. The dollar index is trading in a range of 30 cents since late Thursday as markets are closed for the holiday. In Terms of data, the dollar will be affected this week by the ISM manufacturing PMI today, ISM services PMI on Wednesday, and the nonfarm payrolls on Friday. US equities suffered the worst three months in more than two years, Dow Jones and SPX500 ended the quarter on losses, as trade tensions escalate.


EUR/USD traded in Q1, at the highest level since late 2014, after economic indicators showed that the Eurozone economy is strengthening, leading the European Central Bank to tighten its monetary policy in the coming months. European markets are still closed for Easter. The Eurozone preliminary CPI released will be awaited on Wednesday.


The British Pound was the best performer in March, gaining 1.91%. The GBP traders are happy about the progress of the Brexit transition deal between the United Kingdom and the European Union. Moreover, the solid gains in the earnings index is giving signs that the Bank of England will hike interest rates couple of times in the coming 2 years.


Gold prices appreciated by around 2% in Q1, gold traded at the highest since June 2016. The demand for gold rose as worries of a market collapse are at the highest levels especially after the escalation in the trade tension between China and United States. The demand for Gold as a hedge for inflation also backed the prices. Gold might gain more support if the uncertainty in the market prevails.


Oil prices gained more than 5% in Q1, boosted by the output cut strategy that is being promoted by the OPEC and other suppliers. The final week of Q1 was marked in the history of oil market, as China introduced the first oil future that is not dominated in the US Dollar. The second quarter will be monitored closely as United States might re-introduce sanctions against Iran.

The most important economic events:

  • CAD RBC Canadian Manufacturing PMI (MAR): (GMT 13:30) – Important – Forecast (N/A) – Previous (55.6).
  • USD ISM Manufacturing (MAR): (GMT 14:00) – Important – Forecast (60.0) – Previous (60.8).
  • USD ISM Employment (MAR): (GMT 14:00) – Important – Forecast (N/A) – Previous (59.7).
  • USD ISM Prices Paid (MAR): (GMT 14:00) – Medium – Forecast 72.5) – Previous (74.2).

The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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