Risk assets and currencies traded lower again yesterday as market fears over impending tariffs and Geo Political concerns dominated market moves. It was a sea of red for European equities yesterday with uncertainties over the German political landscape still prevalent despite a last minute deal between Angela Merkel and her coalition allies. The US markets faired a little better to finish the day up, helped along by a stronger ISM Manufacturing PMI print with Australian and Japanese markets set to follow their example. Currencies however showed signs of greater concern for the upcoming US tariff implementation at the end of the week with risk and commodity pairs falling off.
The Asian market will take a brief break from watching news wires today to listen to the RBA’s latest rate announcement, however, that break is expected to be brief with no change of rate firmly expected and little change of message from the central bank. Expectations of a rate hike are now being pushed out further into 2019 and this will do little to help the currency’s strength.
Later in the day, investor focus will swiftly move back to Geo-Political and Trade factors and initially the market will be looking for anything new on the German political front as the European session progresses and then onto anything new from the US administration on trade issues. As this week progresses and time starts to run short before the US tariff implementation, market hopes for a change in stance from the Trump administration will start to fade and this will pressure the downside for risk trades. Conversely, and this is looking less likely with each subsequent tweet or comment, any conciliatory comment will allow for relief rallies across the markets.