USD - United States Dollar
The US dollar advance continued through trade on Tuesday and overnight in the Asian session as US-China trade tensions fostered an appetite for haven assets and forced markets to adopt a risk-off focus. Optimism surrounding a resolution to trade tensions have deteriorated this week following confirmation from President Trump that tariffs will be increased at the end of the month is a deal is not reached. Talks appear to have stalled with no clear resolution in sight, a dramatic turn around as most analysts were pricing in a “done deal.” Headline risk will play a crucial role in shaping short- and medium-term direction and as discussion progress diminishing risk appetite will hit risk assets hard.
Despite Brexit continuing to be the primary filler of column inches within the UK, on the broader world, US/China trade talks remain the major global economic issue. Although the negotiations were dragging on it was hoped some breakthrough would be reached soon; however, Donald Trump's twitter offensive on Friday broke the calm and equity markets were sold off as a result. Asian markets took another leg lower overnight and one of the best barometers of global risk appetite, USD/JPY briefly slipped 110 overnight, although the big figure has been regained as North America has come online. It remains to be seen if another hike in tariffs will be implemented by Trump as threatened with markets hoping it was just sabre rattling to accelerate a conclusion to the impasse.
Further afield there have been some surprising monetary policy moves from Australia and New Zealand with unexpectedly hawkish and dovish moves seen throughout the week. Monday night saw the Reserve Bank of Australia bullishly hold rates when a cut was predicted, then last night the Reserve Bank of New Zealand shocked markets with a rate cut with both central banks now aligned at 1.5%.
1.1188 -1.1212 ▲GBP/USD:
1.3000 - 1.3080 ▼USD/CAD:
1.3442 - 1.3486 ▲AUD/USD:
0.6995 - 0.7027 ▼NZD/USD:
0.6525 - 0.6604 ▼