There is a sea of red across the equity markets this morning as President Trump announced tariffs of up to $60 billion against China, he will impose 25% duties on Chinese Produce. Risk appetite has been hit across the board with safe haven currency buying dominating early moves in the Asian trading session, the UsdJpy has dropped through the 105.00 level and Jpy crosses are on the receiving end of heavy selling pressure. The ASX has already opened well in the red (currently down 1.7%) and the Nikkei looks set to open down at least 2%, this should put further pressure on the UsdJpy and Jpy crosses as we progress through the session.
Earlier in the day we saw the Aussie once again come under pressure after the Unemployment rate increased by 0.1% despite a good result in full time employment, it dropped 40 pips in the Asian session and continued it’s fall in line with the risk off theme throughout the rest of the day, currently trading around 0.7700. In the UK, the MPC confirmed market suspicions that a May rate hike is on the cards as 2 members of the committee voted for a rate hike, Cable and sterling crosses initially came in better bid and the pound should remain bid on any dips over the next few sessions.
Looking ahead to today’s trading sessions and the market will continue to focus on the escalating trade war between the US and China with comments already starting to hit the news wires of China’s response to Washington’s latest move – reciprocal tariffs of $3 bio on US imports planned at the moment. Further uncertainty and increased tensions will only lead to further downside to the stock markets and to risk appetite. It’s quiet in terms of economic data releases today in the Asian and London time zones so trades will be firmly focussing on the news wires.
Into the New York session and we do have some tier 1 data out of Canada and the US with Canadian CPI and Core Retail Sales numbers due along with the US Core Durable Goods Orders but still expect flow to be dominated by further trade and sanctions news.