Yen Down, Aussie Dollar Up on Diluted US Tariffs Against China

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TALKING POINTS – TRADE WAR, TRUMP, CHINA, YEN, AUSSIE DOLLAR, EURO, DRAGHI

  • Yen down, Aussie Dollar up as the US triggers diluted tariffs against China
  • Markets cheer signs of effective pushback against White House protectionism
  • Euro looking to speech from ECB President Mario Draghi for direction cues

Asia Pacific markets mostly shrugged off trade war escalation after US President Donald Trump pushed ahead with another round of tariffs, targeting a further $200 billion in imports from China. The CSI 300 index of Shanghai- and Shenzhen-listed shares and S&P 500 futures rebounded after prior losses.

In the FX space, ebbing haven demand weighed on the US Dollar. The perennially anti-risk Japanese Yen likewise fell. Meanwhile, the sentiment-geared Australian and New Zealand Dollars scored outsized gains against the spectrum of their G10 counterparts.

NEW CHINA TARIFFS A SETBACK FOR TRUMP TRADE AGENDA

Investors’ seemingly counter-intuitive response may reflect the way in which this new round of tariffs is to be implemented. Initially set at 10 percent, they will go up to 25 percent as the calendar turns to 2019. That represents something of a retreat for Mr Trump, who wanted the higher rate implemented right away.

That plan was roundly opposed by US farmers, business interests, and high-ranking members of the president’s own Republican Party. The somewhat watered down approach that leaves room to avoid higher duties if a deal is struck before year-end signals growing push-back to the protectionist agenda.

What’s more, the administration was corralled into taking almost 300 product categories off its original target list, including several marquee Apple Inc products. This too seems to reflect a successful effort by pro-trade advocates to rein in the White House.

EURO LOOKS TO DRAGHI SPEECH FOR DIRECTION

From here, the spotlight turns to a speech from ECB President Mario Draghi. He is due to give the keynote address at an event organized by the ACPR, the regulatory arm of the Bank of France that oversees lenders and insurance companies.

While the central bank chief is unlikely to offer meaningful monetary policy guidance so soon after last week’s rate decision, he may touch on the vulnerability of Eurozone banks to recent emerging market jitters. A sufficiently worried tone might weigh on the Euro.

See our study on the history of trade wars to learn how it might influence financial markets!

ASIA PACIFIC TRADING SESSION

Yen Down, Aussie Dollar Up on Diluted US Tariffs Against China

EUROPEAN TRADING SESSION

Yen Down, Aussie Dollar Up on Diluted US Tariffs Against China

** All times listed in GMT. See the full economic calendar here.

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