What tariffs? Asian session forex traders shrugged off the latest round of U.S. tariffs on Chinese goods in favor of pricing in currency-specific catalysts.
- Australia’s CB leading index maintains 0.1% growth in July
- Australia’s house price index (q/q) slips by another 0.7% as expected
- RBA’s minutes: “no strong case” for near-term policy adjustment
- RBA: funding costs remain low relative to history, in line with cash rate
- South Korea’s Moon Jae-in in Pyongyang for another summit with Kim Jong Un
RBA’s meeting minutes
The Reserve Bank of Australia (RBA) made Aussie bulls happy earlier this month when it stuck to its hawkish bias even though four major Australian banks had hiked their interest rates out of schedule.
Well, it seems like the central bank really isn’t worried over the out-of-cycle rate increases that can dent the impact of its easy policies.
In its meeting minutes the RBA noted that lenders accounting for 40% of the outstanding housing credit had announced higher mortgage lending rates in response to “higher funding costs.” It added that:
“Once they take effect, these increases would imply a small rise in the average outstanding variable housing loan rate, unwinding about half of the decline observed in the average housing loan rate over the preceding year.”
Despite that, RBA members still maintain that “the next move in the cash rate would more likely be an increase than a decrease” though lack of progresses in unemployment and inflation also means that “there was no strong case for a near-term adjustment in monetary policy.”
Mixed risk sentiment
If you’ve just tuned in, then you should know that the Trump administration officially announced that it would place a 10% tariff on $200 billion worth of Chinese products on September 24 and crank them dues higher to 25% by the end of the year.
China has yet to respond to the U.S.’ move though many believe that it will start with officials rejecting U.S. Treasury Secretary Steven Mnuchin’s invite for another round of trade talks in Washington.
The additional tariffs, along with the possibility of China retaliating over the latest decision weighed on most of the Asian bourses.
Nikkei was spared from the pain, however, thanks to optimism that current PM Shinzo Abe will widely defeat former defense minister Shigeru Ishiba in Liberal Democratic Party’s leadership election on September 20.
- Nikkei is up by 1.62% to 23,468.6
- A SX 200 is down by 0.28% to 6,162.2
- Shanghai index is down by 0.12% to 2,648.530
- Hang Seng is down by 0.74% to 26,732.7
Gold took a few steps back when a jump in long-term U.S. Treasury yields boosted dollar demand. Crude oil benchmarks weren’t as lucky, an escalation in the U.S.-China trade war presents uncertainty over the future of Black Crack demand.
- Gold is down by 0.15% to $1,198.69 per troy ounce
- Brent crude oil is down by 0.44% to $77.60 per barrel
- U.S. WTI is down y 0.16% to $68.63 per barrel
Major Market Mover(s):
AUD and NZD
The RBA sticking to its hawkish bias was a welcome surprise for Aussie traders. Meanwhile, the lack of immediate retaliation from China brought the bulls to the Aussie and Kiwi’s yards.
AUD/USD is up by 17 pips (+0.23%) to .7193; AUD/JPY is up by 27 pips (+0.34%) to 80.53; AUD/CAD is up by 25 pips (+0.26%) to .9381, and AUD/CHF is up by 13 pips (+0.19%) to .6919.
NZD/USD is up by 18 pips (+0.27%) to .6594; NZD/JPY is up by 29 pips (+0.39%) to 73.82; NZD/CAD is up by 24 pips (+0.28%) to .8599; GBP/NZD is down by 37 pips (-0.18%) to 1.9956, and NZD/CHF is up by 14 pips (+0.23%) to .6343.
Whether it was profit-taking from the previous session’s strong moves; Japanese traders buying yen-denominated assets after yesterday’s holiday, or risk-taking in the currency arena, the low-yielding yen ended the session lower against its major counterparts.
USD/JPY is up by 12 pips (+0.10%) to 111.96; GBP/JPY is up by 16 pips (+0.11%) to 147.32; EUR/JPY is up by 26 pips (+0.20%) to 130.93, and CHF/JPY is up by 19 pips (+0.16%) to 116.37.
Watch Out For:
- 7:15 am GMT: ECB’s Draghi to give a speech in Paris