Short-lived trade reprieve to set market on edge: OANDA

Trade war rhetoric isn’t likely to go away anytime soon and hyper-volatility could be just around the corner, said Stephen Innes, head of Asia Pacific trading at OANDA, in a note on Friday.

“With the seismic shifts in sentiment this week the last thing this market needs is more confusion,” Innes said. “The latest in a line of bombastic Trump headlines now suggests it will take more than a kind week to sort this trade war issue out.”

That was after U.S. President Trump doubled down on threats to impose tariffs on China, claiming he was retaliating for China’s retaliation. His threats came barely a day after his advisers had calmed markets by saying that the U.S. would negotiate with China before actually imposing tariffs.

“Equity markets held a decent bid overnight with risk sentiment bouncing higher on the back of the recent trade rhetoric suggesting both camps are incredibly motivated to contain trade tension for fear of a global market meltdown,” Innes said. “But this morning’s headlines will question that view. But at a minimum, investors should start wondering why the U.S. administration’s soothsayers are sending out contradictory signals. I fear there are some awful actors in play on this political stage.”

He added, “Trump’s instability alone keeps me awake at night.”