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Dollar price action was mixed, but the comdoll gang was able to put up a good fight despite retaliatory trade measures from China.

  • China responds with 5-10% tariffs on $60 billion U.S. goods
  • Canadian manufacturing sales up 0.9% vs. 1.0% consensus
  • U.S. NAHB housing market index unchanged at 67 vs. 66 forecast
  • New Zealand GDT auction yielded 1.3% drop in dairy prices after 0.7% fall
  • NZ Westpac consumer sentiment index down from 108.6 to 103.5
  • U.K. PM May: “Withdrawal agreement is virtually agreed”
  • API crude oil stockpiles up 1.25M barrels vs. expected 2.5M drop

Major Events/Reports:

China retaliates with $60B in tariffs

After a lot of tough talk in the earlier sessions, Chinese officials showed that their bark is worse than their bite by imposing 5-10% in tariffs on $60 billion worth of U.S. goods also set to take effect on September 24.

These trade duties will be levied on more than 5,000 U.S. imports, including meat, nuts, alcoholic drinks, chemicals, clothes, machinery, furniture and auto parts.

But apart from being considerably lower compared to the $200 billion in Chinese goods targeted by the U.S. in the latest salvo, the tariffs rate was also below the 10-20% that most market participants feared.

Keep in mind that the U.S. also imposed a lower-than-expected rate of 10% versus the expected 25%, only increasing it to this level by the end of the year if China doesn’t cooperate.

Investors saw this as a sign that both countries are giving each other a bit more leeway before putting more power in their trade punches. ICYMI, here’s a rundown of their earlier tariffs.

Trump talks tough, China to pursue talks?

In his latest round of tweets, the POTUS threatened “great and fast retaliation” towards China if they target “farmers, ranchers, and industrial workers.”

However, in a press conference at the White House, he also said that he’s keeping the door open for negotiations with China. Word on the street is that Beijing might send another low-level representative to resume talks.

Gold returns gains, stocks higher

Risk-taking was also evident in Wall Street as U.S. equities seemed unfazed by the rising stakes in the ongoing trade war.

  • Dow 30 index is up 184.84 points to 26,946.96 (+0.71%)
  • S&P 500 index is up 15.51 points to 2,904.31 (+0.54%)
  • Nasdaq is up 60.31 points to 7,956.11 (+0.76%)

Meanwhile, gold returned its earlier safe-haven gains. Crude oil ticked higher on remarks from Saudi Arabian officials on how they’re fine with the commodity hitting $80 per barrel.

  • Gold retreated to $1,198.59 per troy ounce (-0.28%)
  • WTI crude oil advanced to $69.68 per barrel (+1.10%)
  • Brent crude oil is up to $79.06 per barrel (+1.31%)

A few Brexit updates

A bit more optimism was felt on Brexit as Leader of the European People’s Party in the European Parliament, Manfred Weber, acknowledged that the Chequers proposal was a step forward.

According to a spokesperson from PM May’s office:

“They also discussed the Future Framework and agreed that both the UK Parliament and European Parliament should be able to vote on a precise plan for the UK-EU relationship.”

Meanwhile, in an interview with the Daily Express, No. 10 herself assured that a Brexit deal “is virtually agreed,” dousing any hopes for a second referendum and adding:

“I’m putting on the table what we think is the right plan for the UK and deliver a good deal for the EU.”

As for EU chief negotiator Barnier, he reiterated that “October will be the moment of truth” for a Brexit deal. Then again, he previously hinted that they’re willing to wait until sometime in November.

The leaders are due to meet for an EU Summit in Salzburg this week, during which they might set a date for a special Brexit summit to finalize their breakup plans.

Major Market Mover(s):

AUD

Even with trade war shots being fired on both fronts, the higher-yielding Australian dollar managed to dodge any bullets and score some wins. Not-so-harsh tariffs were seen to be a sign that the U.S. and China might temper their tone and avoid causing further damage to the commodity sector.

AUD/USD advanced from .7203 to a high of .7235; AUD/JPY popped back up to the 81.00 levels at a high of 81.21; EUR/AUD slipped from 1.6251 to 1.6154, and GBP/AUD is down to 1.8217.

NZD & CAD

The Kiwi and Loonie were also among the better-performers of the day, with the former shrugging off another decline in dairy prices. The latter brushed off a surprise build in API oil stockpiles and NAFTA jitters.

NZD/USD fell to a low of .6586 then recovered to .6598; NZD/JPY is up from 73.92 to a high of 74.12; EUR/NZD retreated from a high of 1.7781 to 1.7720, and GBP/NZD is down from 1.9994 to 1.9946.

USD/CAD slid further from 1.3024 to 1.2975; CAD/JPY climbed from 86.08 to a high of 86.62; EUR/CAD is down to 1.5149; and GBP/CAD dropped to 1.7082.

Watch Out For:

  • 11:50 pm GMT: Japanese trade balance (deficit to widen from 0.05T JPY to 0.14T JPY)
  • 12:30 am GMT: Australia’s MI leading index (previous reading came in flat)
  • 1:30 am GMT: RBA Assistant Gov. Kent’s testimony
  • Tentative: BOJ monetary policy statement (Here’s what to expect!)
  • Tentative: BOJ press conference