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Chinese Yuan Weakens; Commodities in Correction
Published July 19, 2018
The fallout from Trump’s trade policy continues, with the European Union preparing a new list of American goods to hit with protective measures in case a mission to Washington next week fails to persuade the president not to raise car tariffs.
The onshore Chinese yuan continued its recent weakening, with the currency slumping to 6.7988 per dollar in offshore trading, a fresh one-year low. The People’s Bank of China weakened its fixing beyond 6.7 as signs of further monetary easing add to pressure. Stocks were also hit as the benchmark Shanghai Composite Index closed lower for a fifth straight session. Authorities allowing the currency to slide comes as part of wider official support for the economy, with banks being encouraged to boost lending and reduce borrowing costs.
The British pound took another data-driven hit this morning, falling under $1.30 for the first time in 10 months after retail sales growth for June came in well below expectations at minus 0.5%. Bets on an August rate hike from the Bank of England eased further, while still remaining well above 50 percent. The weakness in cable comes as the currency could drop as much as 8% against the dollar if the UK fails to clinch a Brexit deal with the EU.
Commodities have tumbled into correction Thursday, descending again in the face of the rising dollar and persistent global trade tensions. Copper has dipped below $6,000. West Texas Intermediate crude is testing $68.40. Gold has fallen through to $1,212.