Low-yielding currencies took the top spots during the Asian trading session after the U.S. implemented its scheduled tariff changes and China reciprocated the move.
Meanwhile, political turmoil in Australia dragged the Aussie to the bottom of the forex heap.
- Japan’s flash manufacturing PMI improves from 52.3 to 52.5 in August
- U.S. implements tariffs on more of China’s goods as expected
U.S.-China trade war heats up
The biggest story of the hour is the U.S. pulling the trigger and implementing 25% tariff on an additional $16 billion worth of Chinese products. And as promised, the world’s second-largest economy retaliated in kind.
Today’s tariffs have now hit a combined $100 billion worth of products from the two economies since the first round kicked in in July.
This time around, the U.S. applied tariffs on 279 products including plastics, chemicals, semiconductors, and railway equipment. Interestingly, these are products that would benefit from China’s “Made in China 2025” plan to made Beijing more competitive in the high-tech industries.
On the other side of the world, China has hit around 333 U.S. products including coal, steel, fuel, copper scrap, buses, and medical equipment.
China’s Commerce Ministry said the U.S. was “remaining obstinate” by implementing the latest tariffs, which was implemented on both sides at 4:01 am GMT.
Turnbull loses more support
Australia’s political scene was put under the spotlight today thanks to more ministers resigning from PM Turnbull’s Cabinet.
Greg Hunt, Steven Ciobo, Angus Taylor, Alan Tudge and Michael Keenan have offered their resignations after voting for Dutton in a leadership challenge earlier this week, but Turnbull had turned them down to prevent more instability.
It seems like they’ve tried again (and were successful) today, bringing the number of ministers who have resigned under Turnbull to thirteen MPs.
And if that’s not enough drama, House Leader Christopher Pyne has also successfully moved to adjourn the House of Representatives a week early, which leaves the Liberal Party to deal with its in-house conflicts until sessions resume on September 10.
The cherry on top of the sweet drama is Turnbull refusing to accept another leadership challenge until he gets a petition with 43 signatures representing the majority of the Liberal Party. And when it does happen, Turnbull has promised to quit parliament.
Overall risk aversion
Investors who had their hopes up during this week’s trade negotiations between the U.S. and Chinese representatives got a reality check when the latest tariffs were implemented as scheduled.
- Nikkei is up by 0.24% to 22,415.2
- A SX 200 is down by 0.53% to 6,258.7
- Shanghai index is down by 0.34% to 2,705.396
- Hang Seng is down by 0.72% to 27.727.1
Even commodities took hits, with gold taking hits from dollar demand while crude oil prices danced to the tune of risk aversion.
- Gold is down by 0.42% to $1,190.43 per troy ounce
- Brent crude oil is down by 0.32% to $74.62 per barrel
- U.S. WTI is down by 0.29% to $67.89 per barrel
Major Market Mover(s):
The Aussie received a one-two punch from Australia’s political brouhaha and the U.S. and China implementing more tariffs on each other’s products.
AUD/USD is down by 59 pips (-0.80%) to .7292; AUD/JPY is down by 43 pips (-0.53%) to 80.81; AUD/NZD is down by 30 pips (-0.28%) to 1.0940; AUD/CHF is down by 44 pips (-0.60%) to .7181; EUR/AUD is up by 61 pips (+0.39%) to 1.5839, and GBP/AUD is up by 72 pips (+0.41%) to 1.7637.
USD, JPY, and CHF
An escalation of the U.S.-China trade war drove investors into the arms of the lower-yielding currencies.
The Greenback, in particular, saw more support thanks to yesterday’s FOMC meeting minutes hinting that the Fed’s tightening schedule remains unchanged.
EUR/USD is down by 47 pips (-0.41%) to 1.1550; GBP/USD is down by 50 pips (-0.38%) to 1.2861; USD/JPY is up by 28 pips (+0.25%) to 110.83, and USD/CHF is up by 18 pips (+0.18%) to .9849.
EUR/JPY is down by 19 pips (-0.15%) to 128.01; GBP/JPY is down by 18 pips (-0.13%) to 142.53, and NZD/JPY is down by 16 pips (-0.21%) to 73.87.
EUR/CHF is down by 25 pips (-0.25%) to 1.1376; GBP/CHF is down by 27 pips (-0.22%) to 1.2665; NZD/CHF is down by 19 pips (-0.29%) to .6564; CAD/CHF is down by 11 pips (-0.14%) to .7552, and CHF/JPY is up by 8 pips (+0.07%) to 112.53.
Watch Out For:
- 7:15 am GMT: France’s flash manufacturing PMI (53.5 expected, 53.3 previous)
- 7:15 am GMT: France’s flash services PMI (55.1 expected, 54.9 previous)
- 7:30 am GMT: German Bundesbank President Weidmann to give a speech in Berlin
- 7:30 am GMT: Germany’s flash manufacturing PMI (56.5 expected, 56.9 previous)
- 7:30 am GMT: Germany’s flash services PMI (54.3 expected, 54.1 previous)
- 8:00 am GMT: Euro Zone’s flash manufacturing PMI to remain at 55.1?
- 8:00 am GMT: Euro Zone’s flash services PMI (54.4 expected, 54.2 previous)
- 10:00 am GMT: U.K.’s CBI realized sales (13 expected, 20 previous)
- 11:30 am GMT: ECB to print its monetary policy meeting minutes