Despite encouraging economic data markets are likely to trade cautiously this week as the US and China impose trade sanctions on each other. Oil is in focus ahead of an OPEC meeting on Friday, and a strengthening US dollar is weighing on gold prices.

The US announcement that tariffs will commence on $50 billion of goods on July 6 brought a swift response from China over the weekend. Both nations have promised to meet sanction with sanction, and an escalation that threatens global growth is a real risk. However an underlying acknowledgement that no one wins in a trade war may see common sense prevail.

Traders are following developments in energy markets closely as different member nations make the case for maintaining or lifting current production limits. A fire at oil facilities in Libya could see some of Friday’s weakness reversed.

Commodity prices are under pressure as the US dollar continues to rise. Gold’s slip below an important support level at $1290 may see a downdraft for precious metals. The pressure spread to commodity currencies and the Australian dollar slid below 75 US cents. This presents a quandary for local investors. Lower energy and metals prices could put pressure on key sectors, but the lower currency may attract the attention of international investors.