The People's Bank of China cut the amount of cash that some banks must hold as reserves by 50 basis points, releasing $108 billion in liquidity as the trade war threats from Washington continue to intensify.
Saxo bank Head of FX Strategy John Hardy notes that while the PBoC's stated objective was to aid small-to-medium-sized enterprises, the sharp decline in CNY may well be a response to the threat of trade war.
Elsewhere in FX, Hardy notes that TRY has gained on Erdogan's election win while the Japanese yen is in focus – particularly versus a euro weighed down by migration-driven uncertainty on German chancellor Merkel's political future – as risk-aversion spreads.
Saxo Head of Equity Strategy Peter Garnry cautions investors to remain defensive equities overall and underweight emerging markets, noting that the major indices could see a drop to long-term support as the trade war plays out.
One other factor to watch is the 10-year Treasury yield, which Saxo bonds specialist Althea Spinozzi says might have hit a cycle peak, adding that only a resolution to the trade crisis looks likely to boost it further.
Finally, Garnry reports that European carmakers are in focus on trade war fears with Fed chair Jerome Powell out noting that the current spate of tit-for-tat threats have not yet entered the major macro data releases.
For more on equities, forex, and bonds, watch today's Morning Call in full.
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.
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