Forex today: USD/JPY falls on Trump's trade comments, DXY holds up

Forex today was slightly active following a long weekend, with the dollar picking up a bid and then markets taking heed of Trump's comments with respect to trade with China. 

Trump, who was speaking at a joint news conference Monday in Tokyo with Japanese Prime Minister Shinzo Abe, said the U.S. wasn't ready to make a trade deal with China. “They (China) would like to make a deal. We’re not ready to make a deal,” Trump said, according to Bloomberg. He added that tariffs on Chinese products could go up “very substantially.”

This had an adverse effect on stocks withtThe Dow Jones Industrial Average DJIA, -0.93%  shedding 237.92 points, or 0.9%, to 25,347.77, while the S&P 500 index SPX, -0.84%  fell 23.67 points, or 0.8%, to 2,802.39. The Nasdaq Composite Index COMP, -0.39%  dropped 29.66 points, or 0.4%, to 7,607.35.

US data was hardly a reprieve from the string of disappointments of late but the Conference Board consumer confidence survey saw a strong improvement in May to 134.1, a six month high. However, the Dallas Fed manufacturing survey dropped to  -5.3 in May from +2. 

As for US 10 year treasury yields, they dropped from 2.32% to 2.26% - the lowest since Sep 2017. The 2 year yields fell from 2.17% to 2.12%. The chance of a Fed rate cut by December, implied by Fed fund futures, increased from 130% to 140%.

As for currency price action, analysts at Westpac summed up the moves as follows:

• EUR/USD chopped down from 1.1195 to 1.1160 as European leaders squabbled over the implications of the elections and what they mean for key roles such as EU and ECB president. USD/JPY was lower overall but only about -15 pips on the day at 109.35, the yen not finding as much safe-haven demand as might have been expected.
• AUD/USD was resilient, given the stronger USD, ranging between 0.6915 and 0.6935. 
• NZD fell from 0.6560 to 0.6540. 
• AUD/NZD rose from 1.0555 to 1.0587.

Key notes from Wall Street:

• Wall Street closes in the red on trade war angst

Key events ahead:

Governor and Deputy Governor are in Parliament which includes Q&A and comments will be rolling through:

So far, some comments have come in slightly earlier than expected as follows:

• RBNZ dep gov Bascand: rate cut still working its way through.
• Orr: we are open-minded on changing proposed bank capital requirements but want more capital.

Elsewhere, the New Zealand ANZ business confidence survey (May data due 11am Syd/9am Sing/HK) is on the cards. "The Apr confidence index was -37.5, above the Aug 2018 low of -50 but still very weak after sliding from around +20 before the 2017 election. The activity outlook was +7 in Apr," analysts at Westpac explained.