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Asian session traders caught up to their U.S. counterparts and priced in a not-so-hawkish FOMC statement. Meanwhile, the Aussie was dragged lower by a weak jobs report.

  • Japan’s national core CPI (y/y) up from 0.9% to 1.0% in February
  • China: “…not afraid of and will not recoil from a trade war.”
  • Trump replaces U.S. National Security Advisor HR McMasters

Major Events/Reports:

China responds to Trump’s tariff plans

In case you missed it, the Donald just rolled out his plans to slap tariffs on about $60 billion worth of Chinese goods involved in intellectual property theft.

And while the POTUS has given a 30-day consultation period before the tariffs kick in, that didn’t stop Asian session market players from pricing in an escalation.

And escalate it did! A few hours earlier the Chinese Embassy in the U.S. released a response to Trump’s decision and, yes, it’s pretty much what you expect from the world’s second largest economy.

The statement accused the decision of “ignoring rational voices” and disregarding the “mutually-beneficial nature of China-U.S. trade relations.

It then clarified that it “China does not want a trade war with anyone” but also warned that “China is not afraid of and will not recoil from a trade war.

Near the end of the statement the embassy shared that:

“China is confident and capable of facing any challenge. If a trade war were initiated by the U.S., China would fight to the end to defend its own legitimate interests with all necessary measures.”

Meanwhile, China’s Commerce Ministry also warned that it would impose a 15% tariff on 120 products worth nearly $1 billion if the two countries fail to resolve their trade differences “within a stipulated time.” Yikes!

U.S. National Security Advisor shakeup

As if trade wars aren’t enough for prime time drama, the Donald rocked the boat further by announcing that he’s replacing U.S. National Security Advisor HR McMasters with former UN Ambassador John Bolton.

The move comes exactly a week after White House Press Secretary Sarah Sanders denied any planned changes to the position.

Equities bleed but commodities rise

Not surprisingly, the shakeup got the markets, well, shook.

  • Nikkei dropped by a whopping 4.05% to 20,716.9;
  • Australia’s A SX 200 is down by 0.64% to 5,802;
  • Hang Seng is down by 2.81% to 30,199.0, and
  • Shanghai index is down by 3.27% to 3,156.888.

Commodities had a surprisingly strong trading session, however. Gold gained ground on the back of overall dollar weakness, while oil prices shot higher after Saudi Arabia hinted that its production curbs could extend until 2019.

  • Gold is up by 0.76% to $1,338.67;
  • Brent crude oil is up by 1.00% to $68.51, and
  • U.S. WTI is up by 1.26% to $64.96.

Major Market Mover(s):

The yen was king of the pip hill, as a combination of repatriation from Nikkei’s profit-taking and overall risk aversion pushed the low-yielding currency higher.

USD/JPY is down by 53 pips (-0.50%) to 104.74;
EUR/JPY is down by 33 pips (-0.25%) to 129.19;
GBP/JPY is down by 51 pips (-0.34%) to 148.88, and
AUD/JPY is down by 30 pips (-0.25%) to 80.78.

Not surprisingly, the low-yielding franc also got some action amidst all the risk aversion.

USD/CHF is down by 39 pips (-0.41%) to .9453;
GBP/CHF is down by 32 pips (-0.24%) to 1.3346;
EUR/CHF is down by 16 pips (-0.14%) to 1.1660, and
CAD/CHF is down by 16 pips (-0.22%) to .7318.

Watch Out For:

  • No major economic reports scheduled during the London session. Watch out for Canada’s top-tier reports during the U.S. session, though!