Forex today: Trump imposed further tariffs to kick in on Sep 24th and more to come if retaliation

• Forex today was unfriendly to the dollar to start the day following a strong close on Friday where the DXY had rallied to the 95 handle
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• Instead, investors figured that Trump would go light on China, perhaps only impose 10% on $200b of Chinese imports and that in fact, data has not been as inflationary, putting the Dec rate hike in jeopardy. 

However, the tables soon turned and the US equities traded lower with the news that China will reject the US’s proposal for a new round of trade talks if President Trump implements the next round of tariffs.

"Technology was firmly in the red, with the NASDAQ leading declines, down 1.3% at the time of writing. The S&P and DJIA were down 0.5% and 0.4% respectively. European shares were little changed with Italian shares outperforming after news the budget deficit will be below 2%. Italian yields fell 7-17bps across the curve with US treasuries trading within 1bp of Friday’s close. USD fell against the G10. Oil slipped a touch and gold rose about 0.5% and is trading above $1200/oz," analysts at ANZ explained.

Currency action

EUR/USD was better bid towards 1.1700 with tighter 2-year DE-US yield spreads but the pair dropped on the Trump administration finally made their announcements that the US will impose extra tariffs on China from September 24th, around US200bn. EUR/USD was trading at 1.1686 and dropped to 1.1670 on the announcements that were already priced in - hence the little reaction. Otherwise, the euro has been building a base and the H&S looks out of the game with the recent advances onto the 1.17 handle and failures down at 1.1530. It also appears that Trump is giving China more time to come back to the negotiating tables as holding fire n the 25% tariffs until December and only imposing 10% to start with. Net-long dollar liquidations will add to the bullish case with eyes on 1.1750/00 on a short squeeze. Cable was making a case of r a break of the channel resistance although within a  bearish rising wedge formation creating a tug of war between bulls and bears around 1.3150/60. the pair ended the NY session at 1.3162 within a range of 1.3103/65, supported on softer no-deal Brexit noise where the Irish border remains as the key factor left t be resolved. There was a deterioration of the price after Trump's tariff announcements and the pair dropped back to 1.3142 and trade uncertainty will likely remain the theme moving into the rest of the week. As for the cross, EUR/GBP was lower on sterling strength and dollar weakness ending the day -0.16% to 0.8880 within Monday's range of between 0.8904-0.8880. However, it is unclear that any real Brexit progress has actually been made or markets might be getting overconfident. The market seems to believe that a no-deal situation is likely to be avoided, though October has already been abandoned as a deadline to reach an agreement and a special summit in November seems in the making - we are bound to be in for some cliff-hanging moments along the way.  On the other side of the channel, the Eurozone economy is still showing decent growth and an additional plus for the cross is that the inconsistencies between a challenging 5SM/League attitude on budgetary issues and finance minister Tria’s reassuring statements finally seem close to a solution. As for the Yen, eyes on the BoJ meeting tomorrow, it is a tug of war between the spread and trade wars. Risk sentiment was poor in NY with Wall Street closing in the red as President Donald Trump prepared to announce additional tariffs on Chinese imports while China hinted at a new round of retaliation. The yen strengthened to 111.66 on the announcements and had traded prior to those between a familiar 111.80/10 - EUR/JPY was off from 131.04 down to 130.31 and AUD/JPY 80.59 down to 79.79. The Aussie had been benefiting from the dollar's weakness and rallied through the 10-D SMA when reversing the Asian session losses down to 0.7141, making a high of 0.7196 on a recovery in EM-FX. The pair dropped on the tariff announcements mind you and has jeopardised the inverse H&S, (neckline in the 0.7235/45 zone), with the price now testing the 1.714's once again. Eyes will turn to the RBA minutes and home price risks. 

Key notes from US session:

Breaking News: US to impose $200 billion in tariffs on China from September 24th

S&P500 Technical Analysis: Ending the day in the red just below 2,900 level

Wall Street closes in red dragged by technology

Key events ahead:

"RBA Board meeting minutes for September will be closely scrutinized for discussion about Westpac’s SVR hike (ANZ and CBA hiked after the meeting). The policy statement glossed over the hike with “Some lenders have increased mortgage rates by small amounts, although the average mortgage rate paid is lower than a year ago”. Nothing else new to discuss, although they were right that the economy grew at an above-trend pace in H1 (in fact, was a lot stronger) although they did not have that data point for the Board meeting," analysts at TD Securities explained.