The FX markets showed uncanny resilience to heightened trade tensions in Asia. The US President Donald Trump’s decision to abruptly withdraw his support for a Group of Seven (G7) communique and the attack on his Canadian counterpart Justin Trudeau did put a bid under the anti-risk JPY in Early Asia. But, the risk sentiment unexpectedly stabilized, lifting the Yen cross higher.
For instance, USD/JPY rose from 109.28 to 109.83. Also, AUD/JPY - the risk barometer, rose from 82.95 to 83.56, signaling risk reset. Further, the equities also picked up a bid. Nikkei, Hang Seng, and NIfty posted gains, while S&P/ASX 200 and Shanghai Composite reported moderate losses.
Key news in Asia
As reported by Reuters, US President Trump may have a tough time re-isolating North Korea if the upcoming Trump-Kim summit takes a turn.
Germany's Merkel: US support withdrawal from G7 communique is sobering
German Chancellor Angela Merkel called Trump's decision to withdraw support from G7 communique sobering and bit depressing and reiterated readiness to implement tit-for-tat tariffs.
Trump tweets: "We protect Europe and then get unfairly clobbered on trade"
President Trump singled out German regarding NATO Payments and stressed the need to correct US-Europe trade imbalances.
Key focus ahead
The West is in a crisis of sorts after Trump pulled support for a G7 communique that called for a fair and balanced trade. So, the response from the European and US stock markets to the developments over the weekend will likely guide the FX markets. The Yen crosses may rise further if the European and US stocks report gains.
Also, heightened trade tensions may complicate matters for the Fed, so, the greenback could run into offers. But, the ECB and other major central banks are not immune to trade tensions either. Hence, the losses in the greenback will likely be moderate.
Amid the trade worries, the UK Office for National Statistics (ONS) is scheduled to release UK manufacturing data. An above-forecast reading could strengthen the bid tone around GBP.
Majors
EUR/USD: Corrective rally stalls on weak data, conflicting signals on the charts
GBP/USD remains familiar with 1.34 as impending rate hike, Brexit developments freeze traders
USD/JPY makes a run for 110.00 as risk appetite swings back into the Monday markets
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