The US-China tensions entered a new phase on the last day of the trading week.
Pompeo’s Distrust and Verify Speech
US Secretary of State Mike Pompeo made a very harsh anti-Chinese Communist Party (CCP) speech on Thursday rocking the already volatile US-China relations, and international geopolitical balance.
Pointing out that the CCP is a Marxist-Leninist organization, Pompeo said that the Party Secretary and the President of China, Xi Jinping, is a firm believer in the Marxist ideology and totalitarianism.
Making analogies between the past century’s US-Soviet cold war, Pompeo called for an international alliance against Beijing, underlining that the CCP is a threat to world order, free trade, and democracies.
Sino-US tensions over trade, high technology, the CCP’s concentration of Muslim Uyghur people in communist re-education camps, slave labor, the status of Hong Kong, Tibet, the island of Taiwan, and the South China Sea increased poisonous rhetoric markets between the world’s two giant economies.
Pompeo’s speech seems to be the first salvo in the new cold war and a turning point in the trans-Pacific relations.
The Chinese Foreign Ministry rejected Pompeo’s anti-CCP speech in a statement on Friday. China said the U Secretary of State ignored reality and acted with ideological bias.
Retaliation from China
Meanwhile, China ordered the US to close its consulate in Chengdu, southwest China, on Friday.
China’s retaliation was in kind to the US order to close China’s Houston consulate.
The Chinese Foreign Office defined the US order to close China’s Houston consulate as a decision that “seriously violates international law, the basic norms of international relations, and the Sino-US relations.”
The tensions led the investors to safe havens. Ounce gold (XAUUSD), which is nearing its all-time highs, climbed to the $1898 level last seen in September 2011. Gold is expected to continue its upward trend due to the continued tensions and worsening coronavirus pandemic northern hemisphere after the summer ends.
US President Donald Trump said at a press conference shortly after Pompeo’s speech, that the Phase-1 trade agreement he reached with China at the beginning of the year was no longer important to him.
Stocks suffered losses in Asia and Europe. Similar declines are expected in the US markets as well.
Impact on money markets
The US dollar index, pressured by the increase in record-breaking coronavirus cases in the southern and western states, fell to its lowest level in the last 22 months: 94.57
The weak dollar often leads the purchase of dollar-valued commodities such as oil, while crude oil (WTI) climbed to 41.64.
Brent oil climbed to the top of the last 13 weeks and reached 44.18.
The safe-haven currency Japanese yen, fed by the Sino-US tensions rose to the highest level in the past month against the dollar: USDJPY 106.17.
Euro zone data
According to preliminary reading (P) data published by IHS Markit, a London-based global information provider, Eurozone’s July manufacturing purchasing managers index (PMI) gained 7.8 percent at 51.1, while the service purchasing managers index (PMI) increased by 14.0 percent to 55.1 points.
With the European Union country leaders agreeing on a 750 billion euro recovery fund, euro’s regained confidence continued its rise of the last three months, maintaining its month-long superiority against the US dollar: 1.1621.
The Manufacturing Procurement Managers Index (PMI) in Britain showed a strong economic recovery by coming to the level of 53.6 versus the forecast 52.0 and the previous 50.1 figures.
Similarly, the Service Purchasing Managers Index (PMI) amounted to 56.6, versus the forecast 51.5 previous 47.1 figures.
The British pound fell to 1.2717 against the dollar.