Amid a broad-based US dollar bullish consolidation in Asia, market today has a sense of caution prevalent as the new US tariffs announcement looms that led to the sell-off in the Chinese equities. The Yen was better bid and kept USD/JPY contained around the 112.00 handle while both the EUR and the GBP attempted an unimpressed bounce, as the US dollar consolidated broadly near two-day tops.
The dollar has seen a surge in safe-haven demand from an escalation of global trade tensions involving the United States, China, Canada and the European Union. Expectations of faster U.S. rate rises have also pulled the currency higher.
Monday kicks-off this week on a lighter note, with Japan on holidays, and the Eurozone final CPI release and Bundesbank monthly economic report to keep the EUR, GBP traders busy. The North America calendar too remains data-scarce, as the US Empire State manufacturing index will be the only relevant macro news. The economic data are likely to be overshadowed by the US tariffs announcement on an additional $ 200 billion worth of Chinese imports that is eagerly awaited in the session ahead.
Oil prices slipped on Monday morning in Asia amid the fresh US tariffs announcement on Chinese exports, a move that offset fears of supply constraints caused by US sanctions against Iran. The country’s oil exports are down by almost a third since the sanctions announcement in April. They dropped below 2 million barrels a day in August and continued to fall in the first half of September.
Gold prices on Comex were on the back foot near $1,200 level, with downside risks firming up as the new US tariffs could trigger an extensive USD rally. The sting of positive US economic data on Friday supporting the markets base case Fed outlook, dented Golds appeal into the close. Even though risk aversion may offer gold a lifeline as haven demand weighs on yields, extra pressure on Gold prices is possible as traders focus on the US – China trade wars. As the United States is set impose a new round of tariffs on Chinese imports, US dollar demand could emerge from investors looking to ride the latest trade war storm under the umbrella of US bond yields.