NY Open: Trade fears flare as China strikes back
Trade fears flared in early New York trading as China said it would levy tariffs on $16.0 billion of US imports, matching the amount and timing of the US tariffs set to take effect on August 23. The impact of the news on FX markets was minimal, but Wall Street opened on a sour note. Well, maybe not sour but certainly a little 'off', since the major indices' declines barely broke double digits.
There weren’t any US data of note this morning. Richmond Federal Reserve president Thomas Barkin said the economy was strong enough for further rate increases, which is nothing new and thus the comment was ignored.
Oil prices fell with China trade data suggesting reduced crude imports blamed for the drop. WTI dropped from $69.30/barrel just before New York opened to $67.84/b by mid-morning.
EURUSD is stuck in a 1.1530-1.1630 range with demand for EURGBP and sales of EURJPY a key reason for the narrow band and lack of direction. USDJPY, meanwhile, is torn between risk aversion demand and the outlook for higher rates. A typhoon approaching Tokyo is expected to disrupt the morning rush hour and may put a damper on trading activity in Asia.
USDCAD soared to 1.3120 after June Building Permits were far weaker than forecast (actual -2.3% versus a forecast of 1.0%). The move was quickly reversed, and prices regrouped at 1.3050 support. There is speculation that the Saudi Arabia/Canada diplomatic row is behind the Canadian dollar weakness; it is rumoured that the Saudis sold Canadian assets and Canadian dollars yesterday with fears of more selling to come.
GBPUSD is a basket case. Government officials opining about the perils of a “no-deal” Brexit combined with the downgrading of UK rate hike expectations and bearish technicals have driven GBPUSD through key support at 1.3020 and 1.2910. If 1.2840 breaks, there isn’t a lot of support until 1.2600.