The threat of recession will return panic to financial markets

The threat of escalation of the trade war between the United States and China increases the risks for the entire global economy. Trump and Xi Jinping are expected to meet at the G20 summit in Buenos Aires next week, but the chances of finding a solution that suits both parties are extremely small.

The main reason for the negative expectations is a slowdown in the global economy, which threatens to slow down both sides, regardless of the outcome of a trade war.

Signs of a new crisis approaching are complex. For example, the current decline in oil prices is due to a variety of reasons, such as sanctions against Iran, oversupply from countries not participating in the OPEC + agreement, but there is a more pragmatic option, prices are declining due to the threat of slowing global demand. The slowdown in demand also indicates that the world economy cannot generate sustainable energy demand, and therefore is preparing for a recession.

At the same time, metal prices show a similar trend ahead. For example, copper is a technological metal, and the demand for it correlates with the growth of the technology sector as a whole. Copper peak was reached in the summer of 2018, then prices fell sharply due to the beginning of trade wars, the trend is negative. Iron ore passed the peak in the spring of 2017, after which prices began to decline.


In an attempt to support the growth of activity, the Chinese authorities decided to exempt large foreign investors from taxes on coupon income on bonds in the domestic market. This measure shows the seriousness of the problem since it eliminates any likelihood of China abandoning the "Strategy 2025" policy, which the US insists on, and reduces the likelihood of a compromise in a trade war.

Today in the afternoon, volatility may increase, since players will compensate for yesterday's holiday in the US, and the closing of the week will play its role. The dollar looks like a favorite so far, but if the rumors about the Fed's suspension of growth rates are confirmed, then the formation of a large-scale correction is possible in the short term.


The euro could take advantage of rumors about possible changes in the Fed's policy, but it wasn't the case, the euro is also practically nothing to rely on. The slowdown in business activity is noted in all sectors of the economy, which holds back any hawkish intentions of the ECB, which, in fact, was not even possible to declare, not to start implementing.

The European Commission published a report on the level of consumer confidence in the eurozone in November, a preliminary level of -3.9p worse than -2.7p a month earlier, and this is the smallest value in more than a year and a half, the trend is obvious and does not require special explanation.


Today, Markit will release preliminary data on PMI for November, neutral expectations with a bias towards negative. At the same time, forecasts for the United States are slightly better, which indicates that the dominant idea in the markets for higher economic growth rates in the United States than in the eurozone.

The currency pair EUR / USD will continue to trade in the range, there are some reasons for a breakthrough, either way, players will wait for the results of the EU summit at the end of the week. Growth is limited by the resistance of 1.1445, and support of 1.1360.

Great Britain

Pound, as expected, is trying to strengthen against the background of improved prospects for Brexit before the EU summit. According to the chairman of the European Council, Donald Tusk, the parties agreed on the text of a political declaration, which means that the chances for its signing on November 25 have noticeably increased.

From Monday, the focus will shift to the UK Parliament, where May has no advantage, and the chances of passing the agreement are still low. Nevertheless, the short-term positions of the pound look strong. Today, GBP / USD may attempt growth, the targets are 1.3080, 1.3125 and 1.3180.

The material has been provided by InstaForex Company -