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Trump threatens to raise China tariffs before talks this week

USD - United States Dollar

President Donald Trump tweeted yesterday twice that trade negotiations are going "too slowly" and tariffs on $ 200 billion of imports from China will rise from 10 percent to 25 percent this Friday. The President seeks to up the pressure ahead of China Vice Premier Liu's visit to Washington for the latest round of trade talks this Wednesday. Discussions should continue this week, but it is unclear whether Vice Premier Liu He would attend or whether China would be willing to continue with the pressure from the US.

Federal Reserve Vice Chair Richard Clarida said last Friday that the US economy was "at or close to" the Fed's objectives on inflation and unemployment. Clarida further said that he regarded inflation as "muted" but saw inflation expectations as "stable." Furthermore, St Louis Federal Reserve President James Bullard said a rate cut might happen if price growth remains low later this year, and not because of bad data on the US economy. He added that it would be a rate cut because "we want to make sure that inflation expectations and eventually actual inflation is more consistent with our 2 percent target."

Key Movers

The Chinese Yuan fell the most since August and US index futures declined after Trump's tariff tweets. His comments came after the S&P 500 Index boosted the most in a month.

Later tonight, the RBA Cash Rate Target will be released. Market participants in Australia will be eager following weak inflation, which means that there is a likelihood the RBA can cut rates.

Regarding Brexit; Tory and Labour parties lose in local elections suggesting frustration over the handling of Brexit. The setback is seen as providing an incentive for May and Corbyn to reach a compromise this week. For now, the British Pound weakens following Trump tweets.

Expected Ranges

EUR/USD: 1.1160 to 1.1203 ▲

GBP/USD: 1.3020 to 1.3175 ▼

USD/CAD: 1.3450 to 1.3525 ▲

AUD/USD: 1.0650 to 1.7025 ▼

NZD/USD: 0.6550 to 0.6650 ▼