TALKING POINTS – TRADE WAR, CHINA, G7, YEN, BOJ
- Commodity currencies down with Chinese stocks on trade war fears
- BOJ holds policy unchanged, Yen might rise as risk aversion deepens
- UofM measure of US consumer confidence expected to rise in June
Trade war jitters look set to reclaim the spotlight in the final hours of the week. The sentiment-linked Australian, Canadian and New Zealand Dollars fell alongside stocks in China as the US prepared to release a list of goods from the East Asian giant that will be subject to a new $50 billion round of tariffs.
Broader risk aversion is yet to take hold. Bellwether S&P 500[1] futures are treading water and the anti-risk Yen is trading flat, though the latter may reflect another firmly dovish policy announcement from the Bank of Japan as much as the absence of a concerted risk-off push.
A re-examination of last weekend’s contentious G7 leaders’ summit now that more immediately pressing scheduled event risk (Trump/Kim summit, FOMC[2], ECB) has passed might amplify concerns. Indeed escalating tensions between the world’s top economies seems hardly uplifting for investors’ mood.
BACKGROUND: A Brief History of Trade Wars, 1900-Present[3]
On the data front, the University of Michigan measure of US consumer confidence is expected to tick higher after two months of moderation. This seems unlikely to mark a meaningful offset if risk-off capital flows gather legitimate momentum however.
In such a scenario, the Yen stands out as the most obvious beneficiary amid the unwinding of carry trades. The US Dollar[4]
