American FX Outlook: Risk-off sentiment drives markets as trade war escalates

What you need to know before markets open

• The US President Donald Trump ordered to impose another round of tariffs on China’s export worth $200 billion escalating the trade war. For details read Yohay’s in-depth analysis here and my tariffs comparison here. 
• World equity markets are falling as trade war fear spreads around.
• The UK Prime Minister Theresa May suffered a defeat on her key Brexit legislation in the House of Lords with key battle set to take place on Wednesday in House of Commons.
• The RBA minutes repeatedly stated that rise in the Australian Dollar would lead to slower pick up in both inflation and the economic growth. 
• The ECB President Mario Draghi officially opened the central bankers’ symposium in Sintra repeating the outlook from last week’s Governing Council meeting.
• The US housing markets statistics are due to show a mixed picture with housing starts rising while building permits are set to fall.

Tuesday's upcoming market moving events

• The ECB executive board member and the ECB chief economist Peter Praet is chairing Panel “Macroeconomics of price and wage-setting” at ECB Forum on Central Banking in Sintra, Portugal at 11:00 GMT.
• The US building permits are seen falling -1.4% m/m in May while housing starts are expected to rise 1.4% m/m.

Major market themes

• The US Dollar rose against European major trading up 0.6% against both EUR and GBP as the US-led trade wars escalated.
• The central bankers’ symposium in Sintra is set to deliver a plethora of speakers including ECB chief economist Peter Praet.

Earlier in Asia/Europe

• The RBA meeting minutes said that a rise in the Australian Dollar would lead to slower pick up in both inflation and the economic growth.
• In April 2018 the Eurozone current account recorded a surplus of €28.4 billion.
• The ECB President Mario Draghi opened the central bankers’ symposium hosted by ECB in Sintra, Portugal repeating the monetary policy stance given last week after the Governing Council said it will prolong asset purchasing until December 2018.