Decreasing Treasury yields today led investors to believe the economy of the United States is heading for a decline. This has caused a renewed debate over whether the Federal Reserve will lower interest rates to support the economy, with some analysts betting it could even happen this month. The main damages to the economy come from the extended trade conflict with China, which is exacerbating the global economic slowdown.
The dollar index remains near 96.35, but the USD is giving up positions against the Japanese yen, which is the more popular safety asset.
Moreover, there is a similar sentiment in Europe. Yields are decreasing and the European Central Bank and the Bank of England both seem ready to adjust their monetary policy and get even more dovish than they are right now.
Meanwhile, trade relations are also worsening in East Asia, where Japan and South Korea got into a political argument. Last year the South Korean court demanded financial reparations from Japan for the forced labor (especially forced prostitution) that Korean citizens suffered during Japan’s occupation of their land between the two world wars. Aside from refusing to pay, Japan also announced it would limit its export of smartphone materials to South Korea. Korea is home to Samsung and other leading tech companies, while Japan has a near-monopoly on said materials. This would put immense pressure on the tech market, considering the high demand for smartphones, tablets, and computers, not to mention that Samsung manufactures Apple’s parts as well.
