Headlines again dominated the spotlight 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 10% tariffs on $200b worth of Chinese imports. Still, 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 duties directly. Analysts suggest they could achieve 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 safe-haven currencies and assets. The S&P dropped 0.5% straight away, and the Shanghai Composite lost 4%. US 10-year treasury yields fell to 2.85% from 2.92% and the Japanese Yen (safe-haven currency) appreciated by 1%. The market now turns its attention to further headline and more central bank speeches with the RBA, ECB, BOJ and the FED releasing statements today.