US-China Tensions to Amplify Recent AUD/USD, S&P 500, Oil Volatility?

Talking Points – Will US-China Trade War Fears Amplify Recent Volatility in Financial Markets?

  • AUD/USD, S&P 500, crude oil volatility has been rising of late
  • Trade war fears may be standing aside for more pressing issues
  • Will US-China tensions amplify these moves in financial markets?

Could US-China tensions amplify recent volatility that has rocked financial markets? It is worth noting that while concerns over the trade war may be fading amid the coronavirus outbreak, the subsequent attempt at global economic recovery, and ahead of the US presidential election, the threat is very much still there. How can this impact assets such as the growth-linked Australian Dollar, haven-linked US Dollar, S&P 500 and crude oil prices?

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In the recording above, I recap US-China trade war developments since 2017. I took a look at how that impacted global growth estimates and manufacturing PMI data. How did the Federal Reserve (Fed) respond to the threats that tariffs posed to not just domestic, but also external growth? With monetary policy at extraordinary accommodative levels, is there ammunition left to counter rising US-China trade woes now?

The latter could depend on how this year’s US presidential election unfolds. At this moment in time, it seems China is falling behind on purchasing agricultural products as outlined in the phase-one trade deal. Recent rhetoric from President Donald Trump about decoupling from China has also unnerved investors. What other developments between the US and China should traders keep an eye out for as November nears?

AUD/USD, S&P 500, US Dollar Versus Global Manufacturing PMI Since Late 2017

US-China Tensions to Amplify Recent AUD/USD, S&P 500, Oil Volatility?

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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