The North American currencies, namely the Greenback and the Loonie, found themselves at the bottom of the forex pile on account of trade troubles.
In particular, the looming announcement of a fresh batch of tariffs on Chinese imports convinced traders to dump the U.S. dollar. Meanwhile, the lack of progress in NAFTA seems to have worn Loonie bulls out.
- Canadian foreign securities purchases up from 10.3B CAD to 12.65B CAD
- U.S. Empire State manufacturing index slumped from 25.6 to 19.0 vs. 23.2 forecast
- U.K. CB leading index posted another 0.2% drop in July
- Australian CB leading printed another 0.1% uptick in July
- U.S. next round of tariffs on $200B Chinese imports effective Sept. 24
- U.S. tariffs rate on this set to go up from 10% to 25% by end of year
- Trump threatens $267B more in tariffs if China retaliates
U.S. slaps more tariffs on China
Uncle Sam has officially fired yet another shot in the ongoing trade war with China, imposing a new set of tariffs on roughly $200 billion worth of Chinese imports. These tariffs, currently set at 10%, will take effect on September 24 and will be increased to 25% by the end of the year.
Wondering how much both countries now have at stake? Here’s a quick primer on the U.S.-China trade war by my buddy Forex Gump.
The latest announcement wasn’t much of a surprise, although the buildup did spur a slow grind lower for U.S. assets. After all, this would bring even more uncertainty for businesses as China would likely make a retaliatory move.
And if they do, the POTUS is threatening to slap another set of tariffs on $267 billion more Chinese goods. Oh, joy.
Risk-off moves return
Market participants were unable to keep up their jolly spirits from the earlier trading session as the spotlight returned to trade tensions. Prior to the actual announcement, White House economic advisor Kudlow mentioned in an interview with the CNBC that an announcement is coming soon while the Donald himself said that it is due by market close.
U.S. equity indices closed in the red, with some of the losses also resulting from steep declines in tech shares:
- Dow 30 index is down 92.55 points to 26,062.12 (-0.35%)
- S&P 500 index is down 16.18 points to 2,888.80 (-0.56%)
- Nasdaq is down 114.25 points to 7,895.79 (-1.43%)
Gold inched higher as the precious metal took advantage of dollar weakness while crude oil dipped. Expectations of output adjustments from the OPEC-Russia meeting next weekend might also be in play.
- Gold rose $7.46 to $1,200.96 per troy ounce (+0.63%)
- WTI crude oil is down $0.25 to $68.74 per barrel (-0.36%)
Major Market Mover(s):
The scrilla crawled lower leading up to the official announcement of more U.S. tariffs on China. To add insult to injury, the Empire State manufacturing index disappointed as the firms’ six-month outlook was tempered likely by the worsening trade situation.
USD/JPY sank from 112.03 to 111.70, EUR/USD climbed from 1.1661 to a high of 1.1699 then retreated to 1.1683, GBP/USD reached a high of 1.3166, and USD/CHF slipped to a low of .9611.
The Loonie also found itself sitting on the losers’ bench as Canada was dealing with trade issues of its own and crude oil was also in the red.
Optimism for seeing a NAFTA deal anytime soon appears to have faded, with Freeland saying that there is no formal date for talks this week yet.
USD/CAD found support around the 1.3000 handle then bounced to a high of 1.3043, CAD/JPY sank from 86.02 to a low of 85.85, EUR/CAD climbed from 1.5184 to a high of 1.5239, and GBP/CAD is up to 1.7173.
Watch Out For:
- 1:30 am GMT: RBA monetary policy meeting minutes (Review their rate decision here!)
- 1:30 am GMT: Australia’s HPI q/q (another 0.7% drop expected)