Headlines:
Markets:
- EUR leads, USD lags on the day
- European equities lower; S&P 500 futures up 0.4%
- US 10-year yields up 4.3 bps to 4.432%
- Gold up 1.4% to $3,218.58
- WTI crude down 0.2% to $59.92
- Bitcoin up 2.8% to $82,148
And so the game of chicken continues. China has chosen not to blink first as they prop up their markets before announcing retaliatory tariffs against the US once more. This time around though, they’re saying with tariffs of over 100% that they aren’t going to escalate it any further with trade conditions effectively stifled at this stage.
It looks like China is going to be hunkering down from here to see how all of this is going to play out. They still have other means to retaliate though, such as devaluing the yuan or restricting exports of rare earth minerals if they do choose. But we’ll see at this stage.
The market took the news in stride for the most part though. The dollar did slide further with EUR/USD touching a high of 1.1475 before backing off again to 1.1350 now. That said, the dollar was already punished hard coming into European trading and it’s still highly vulnerable amid the ongoing tariffs saga.
USD/JPY also fell to near 142.00 before picking back up to 142.85 currently, down 1.1% on the day. For once perhaps, the Swiss franc isn’t the lead gainer and could that owe to the SNB intervening just as EUR/CHF moved close towards the 0.9200 mark? The pair is seen up 0.3% today to 0.9250 now despite risk sentiment staying more cautious.
Elsewhere, GBP/USD is also seen up 1% to 1.3096 and AUD/USD just mildly higher by 0.2% to 0.6235. The aussie continues to be caught in the crossfire of the US-China trade war of course.
In other markets, US futures were down around 1.5% in early European trading before staging a comeback to sit 1% higher. The China headlines saw gains pared but we’re seeing traders fade that with some hope of a deal before the weekend it would seem.
That sentiment is also seen in the bond market with 30-year yields having raced higher to 4.91% before falling back to around 4.81% during the session. Yields are now at 4.87%, still in dangerous territory as we head into US trading.
What a week it has been and we’re not quite done yet. You can’t help but feel that there might be one final twist to the whole saga before the weekend comes along. For now, the ball is pushed back over to Trump’s side of the court. What’s his next play going to be? Or will the Fed be forced into QE if the bond market pain becomes too much to handle?
