TALKING POINTS – US DOLLAR, JOBS, EURO, TARIFFS, TRADE WAR, YEN
- US Dollar[1] may rise on haven demand as trade war fears spook markets
- Euro[2] may suffer outsized losses as the EU fires back at US tariff increase
- Japanese Yen[3] may advance as risk aversion triggers carry trade unwind
The US Dollar traded broadly higher in Asia Pacific trade in what might have reflected pre-positioning ahead of the incoming release of May’s labor-market data. A modest pickup in job creation is expected while the unemployment rate as well as the on-year pace of wage inflation hold steady.
On balance, it would take an improbably dramatic deviation from forecasts for the release to alter the established Fed monetary policy outlook. With that in mind, the release may pass without a discrete reaction from financial markets.
Rather, the passage of event risk may open the door for sentiment trends to reassert their influence over price action. The path of least resistance seems to favor risk aversion as renewed trade war jitters unnerve investors after the US allowed to lapse steel and aluminum tariff exemptions for Canada, Mexico and the EU[4].
Asia Pacific shares put in a mixed performance[5] – with the looming US jobs report probably discouraging directional commitment – but Chinese markets offered a glimpse of what may be ahead. The Shanghai Composite index plunged, reflecting how assets immediately impacted by US protectionism might fare.
The Australian Dollar[6] followed China’s bourses downward. That added to the sense that markets were worried about the negative knock-on effects of a trade war on the
