Headlines again dominated the spot light as investors fled to safety over escalating trade war concerns. The past 24 hours have been exceptionally volatile for global FX markets as Traders attempt to work out a strategy in a changing landscape. Ultimately though, the USD strengthened against a basket of currencies, reaching 95.01 on the DXY.
President Trump was again the catalyst for volatility in overnight trading, announcing overnight that he was considering tariffs on $200b worth of Chinese imports. Again, the Chinese response was swift, releasing a statement saying that it intended to take ‘comprehensive quantitative and qualitative measures’ should the tariffs be implemented. Currently China imports approximately $130b worth of goods and cannot match the tariffs directly. Analysts suggest they could implement their counter in a variety of ways to adjust for this, including increased regulatory scrutiny.
Investors across the globe took the news poorly with a flight to save-haven currencies and assets. The S&P dropped 0.5% straight away and the Shanghai Composite dropped 4%. US 10-year treasury yields fell to 2.85% from 2.92% and the Japanese Yen (safe-haven currency) appreciated by 1%. The Aussie, a proxy for China, fell from 0.7425 to 0.7350 recording a fresh year to date low.
The market now turns its attentions to further headline and more central bank speeches with the RBA, ECB, BOJ and the FED releasing statements today.