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Global trade war updates got nothing on the forex bulls, as risk-taking prevailed despite China’s pre-emptive strike.

  • BOJ’s Tankan manufacturing index down from 26 to 24 in Q1 2018
  • BOJ’s Tankan non-manufacturing index down from 25 to 23 in Q1 2018
  • Japan’s final manufacturing index revised lower from 53.2 to 53.1 in March
  • Australia’s MI inflation gauge up by 0.1% vs. 0.1% decline in March
  • China’s Caixin manufacturing PMI down from 51.6 to 51.0 in March
  • China imposes additional tariffs on 128 U.S. products

Major Events/Reports:

Japan’s data dump

Japan got an early start to the busy NFP week by printing a slew of economic reports. Unfortunately, the reports weren’t much help for the yen.

The quarterly Tankan manufacturing and non-manufacturing reports, for example, reflected a gloomier mood for corporations in Q1 2018. Manufacturers’ confidence fell by 2 points to 24 in March, while non-manufacturers’ sentiment also soured by 2 points to 23 on the back of stronger yen and threats of global trade war.

Japan’s manufacturing PMI was also revised lower in March. The initial 53.2 reading was adjusted to 53.1, which remains lower than February’s 54.1 figure. Investors aren’t too worried, though, since the PMI is still in expansionary territory.

China imposes additional tariffs on U.S. products

The biggest story of the hour is China starting Q2 with a bang. Specifically, the world’s second largest economy just slapped additional tariffs on 128 U.S. products.

China’s Ministry of Commerce (MOFCOM) announced late Sunday that it will suspend its obligations to the World Trade Organization to reduce tariffs on 120 U.S. products, saying that it’s a “legitimate action adopted under WTO rules to safeguard China’s interests.”

Starting April 2, tariffs on 120 U.S. products – which includes products like cherries, almonds, and pistachios – will be raised by an extra 15%, while eight other products including frozen pork will have additional tariffs of 25%.

The move is consistent with Beijing’s proposal last month to impose tariffs on $3B worth of U.S. products, and comes after Trump threatened to impose tariffs on $50B worth of Chinese exports AND limit Chinese investment on the U.S. tech sector.

Overall risk appetite

Whether it’s due to start-of-quarter risk-taking or the Australian and New Zealand economies still out on holidays, the Asian bourses started April trading on a positive note.

  • Nikkei is up by 0.46% to 21,554.0;
  • Hang Seng is up by 0.24% to 30,093.4, and
  • Shanghai index is up by 0.18% to 3,174.475.

Commodity prices also got a boost during the session.

  • Gold is up by 0.33% to $1,329.43;
  • Brent crude oil is up by 0.53% to $69.70, and
  • U.S. WTI is up by 0.43% to $65.16.

Major Market Mover(s):

There’s no specific catalyst for the pound’s gains across the board. However, traders could be back on the bullish train after heavily losing out to its counterparts last week.

GBP/USD is up by 15 pips (+0.10%) to 1.4042;
GBP/JPY is up by 25 pips (+0.17%) to 149.30;
GBP/CHF is up by 29 pips (+0.22%) to 1.3400, and
GBP/NZD is up by 45 pips (+0.23%) to 1.9427.

The Loonie extended its gains from the previous week on the back of stronger oil prices and overall risk-taking.

CAD/JPY is up by 10 pips (+0.12%) to 82.46;
CAD/CHF is up by 12 pips (+0.16%) to .7401;
AUD/CAD is down by 8 pips (-0.08%) to .9897, and
EUR/CAD is down by 6 pips (-0.04%) to 1.5879.

You read that right! Earlier today the People’s Bank of China (PBoC) lifted its official yuan mid-point to 6.2764 per dollar, which marks its strongest reading since the devaluation in 2015.

The move came after the yuan posted its best quarterly performance against the Greenback as traders flocked to the Chinese currency amidst the country’s brewing trade war with the U.S. Looks like they mean business!

Watch Out For:

  • Swiss, French, German, Italian, and U.K. banks closed for Easter Monday holiday