The mood in the financial markets in recent days leaves much to be desired. The reason for the deterioration was the decision of China to impose new import duties on American goods worth $ 75 billion, which will come into force on 1 September.
The situation is compounded by the fact that the United States did not tighten with the answer. Immediately after China announced intentions to increase taxes on American imports, the US President Donald trump ordered on October 1 to raise tariffs on all Chinese imports. In accordance with the order, the goods from China to 250 billion dollars will be taxed at the rate of 30%, the remainder of the Chinese imports cost $ 300 billion since October 1 will be taxed at the rate of 15%.
In the background of escalating trade tensions investors are skeptical about the new round of talks between the US and China, which will be held in September. At least, the mutual exchange of duties before the anticipated resumption of negotiations is clear evidence that the conflict has already passed the phase when the market was still present hope for the ability of countries to overcome trade disagreements. The worsening of trade relations between countries brought to the market concerns over the Outlook for global economic growth. In such situations, market participants try to avoid investment in risky assets.
Recall that in early August the S&P 500 index lost more than 4% just on fears of strengthening trade confrontation between the US and China, but also because of the uncertainty regarding the changes in fed interest rates. Market participants continue to closely monitor the situation around the inversion of the yield curve between short-term and long-term bonds. Yesterday the spread between 2-year and 10-year Treasury bonds reached a new peak of negative values, while continuing to signal the imminent recession of the U.S. economy.
Previously at the investment Bank Morgan Stanley has made a forecast that the world economy will fall into recession in 6-9 months if the US and China will meet its promises and unleash a new tariff war. Until the situation does not change, we recommend you to invest in a “safe Harbor” checked more than one period of economic uncertainty: gold, the franc, the yen and bonds. Since then, the number of these assets applies to bitcoin, and all thanks to one of the most valuable of its qualities, Neoplatonic nature.
The slowdown in global growth has already forced the world’s Central banks to resort to additional monetary stimulus. Soft monetary policy has for the fed, RBA, RBNZ, Bank of Canada and Central Bank of South Korea, Japan, India and Indonesia. Additional stimulation of growth of national economies always implies lower interest rates which lead to an increase in the money supply and the devaluation of the regional currency.
In the case that the economic crisis will cover the global economy, Fiat money will cease to be something that represents value. In such circumstances, investments in bitcoin will become another tool for hedging foreign exchange risk. It is worth noting that increased demand for bitcoin can be already observed. In the aftermath of a currency war may send it to the previous highs around $20 000.
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