TALKING POINTS – TRADE WAR, CHINA, YEN, FRANC, US DOLLAR, FED
- Yen, Swiss Franc[1] aim higher as trade war worries sour market mood
- Australian, NZ Dollars may bear the brunt of risk-off selling pressure
- Hawkish Fed-speak might help US Dollar[2] continue to build upward
The anti-risk Japanese Yen[3] and Swiss Franc outperformed as trade war worries soured risk appetite in Asia Pacific trade. Having dispensed with last week’s heavy duty event risk, financial markets have turned their attention to the threat to global growth posed by deepening fissures between the US and other top economies (as expected[4]). The immediate trigger was a China’s response to US tariffs[5] over the weekend.
BACKGROUND: A Brief History of Trade Wars, 1900-Present[6]
From here, a sharp love lower in futures tracking the FTSE 100[7] and S&P 500[8] equity benchmarks signals the risk-off mood is likely to persist as London and New York come online. That seems likely to keep the Yen and Franc well-supported. Sentiment-geared commodity bloc currencies – the Australian and New Zealand Dollars in particular – might bear the brunt of selling pressure.
Meanwhile, the US Dollar may continue to build higher after last week’s explosive gains[9] if incoming commentary from Federal Reserve officials echoes the hawkish tone of the FOMC[10] monetary policy announcement. Scheduled remarks from Raphael Bostic and John Williams, presidents of the US central bank’s Atlanta and New York branches are due today.
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