Summary:

• Chinese trade surplus with the US increases substantially in June handing Donald Trump fresh reasons to push ahead
• PBoC does not tinker a yuan reference point, but injects money into the market
• GBP moves slightly lower as Trump says soft Brexit likely to kill off US trade deal

The trade data coming from the Chinese customs administration revealed on Friday showed that the trade surplus with the United States increased in June to $41.61 billion making a giant leap compared to the previous month which saw a $24.23 billion surplus. The release reignited concerns with regard to the ongoing trade spat between the two world’s largest economies, receding odds for any imminent ceasefire. In annual US dollar terms exports climbed 11.3% largely beating the consensus pointing to a 9.5% rise, whereas imports disappointed and came in at 14.1% falling short of quite the demanding median estimate placed at 21.3%. The data illustrates one of the most unwilling scenario the Trump administration would like to see, and it is a clear reason for the US President to push ahead with the lately signalled $200 billion levies on Chinese goods (they are likely to come into affect in early September).

China revealed a huge jump in its trade surplus with the US in June. Source: Bloomberg

Meanwhile, the Chinese PBoC refrained from altering a yuan reference point during the Friday’s session and it did not even open its common open market operations. Instead, the central bank offered banks 188.5 billion CNY through its 1-year medium-term lending facility (MLF). Looking at Asian equities one may arrive at a conclusion that both the trade data as well as more liquidity injected to the money market did not spur any meaningful impact. As of 6:36 am BST the Hang Seng (CHNComp on xStation5) is trading 0.25% higher, the Shanghai Composite is losing 0.3% while the Australian stock market is adding a meagre 0.05% gain. Heading to the week’s end it’s worth taking a closer look at a weekly time frame depicting of the Chinese Hang Seng.

As one can see the price has see-sawed during the week, and is likely to end up with a long-legged doji. This kind of a pattern suggest that neither bulls nor bears have been able to retain their gains. Nonetheless, taking into account that the index has failed to break 10900 points and having in the head that a further trade war escalation seems to be only a matter of time one may suppose that the Chinese index could be subject to further losses once it moves through 10440 points. Source: xStation5

On the currency front the British pound might be identified as the worst performing major currency in the morning which stems mainly from subsequent Brexit-related affairs. Namely, Donald Trump said during his visit in the UK that a soft Brexit, being under considerations of PM Theresa May, is likely to end hopes of a trade deal with the United States. He also referred to the latest departure of Boris Johnson saying that if he had not resigned he would have been a “great” leader. After the turbulent week (resignations of Johnson and Davis) the British pound has shed a lot of its previous gains, and glancing at the chart below allows us to notice that the GBPUSD is again coming to its outstandingly crucial technical support.

The GBPUSD is again heading toward its crucial support area at around 1.3050 as the remarkably rough week is coming to an end. Until the pair keeps on moving above this level it is likely bulls could keep control. Source: xStation5