Forex Today: Yen gains on US-China trade escalation; eyes on EZ/UK Services PMIs

The risk-off sentiment remained at full steam in Asia this Monday, as the US-China trade escalation spooked markets, with traders dumping the risk assets such as the equities, yields, oil, Antipodeans, etc. amid an increased flight to safety.

Therefore, the safe-haven currencies such as the Yen and Swiss franc benefited across the board, with USD/JPY having hit fresh seven-month lows at 105.80. The Chinese Yuan also slipped and breached the key 7.00 support vs. the greenback amid trade woes and poor Chinese Caixin Services PMI. The Antipodeans witnessed sharp losses and reached seven-month lows before recovering some ground. The Aussie fell sharply to 0.6748 before trimming losses to trade near 0.6785 region while the Kiwi regained 0.65 handle and beyond amid a broadly weaker US dollar.

Among the commodities, gold hit YTD tops at 1468.05 levels while both crude benchmarks dropped over 1% amid falling Treasury yields and Asian equities.  The Asian stocks markets are down 1-2.20%, with the Nikkei 225 index the main laggard.

Main Topics in Asia

US-China Trade Updates

Chinese state media questions whether US trade talks should continue - SCMP

China said to ask State buyers to halt US agriculture imports - Bloomberg

USD/CNH rises above the symbolic level of 7.00

Other Key Headlines

NZIER’s Monetary Policy Shadow Board see a no-change decision for Wednesday

German 30-year yield drops below zero for the first time ever

Gold technical analysis: Bulls have their eyes on the 127.2% Fibo target up at $1,560

China Caixin Services PMI comes in below expectations at 51.6 (vs expected 52.0)

Japan FX Diplomat: Watching FX moves with sense of urgency - Reuters

Japan's Suga: We are watching the market as Yen strengthens

Japan PM Abe: Concerned by risk posed by foreign economic downside

NZ Treasury: Increased the downside risk to near-term GDP growth forecasts, Kiwi clings to 0.6500

PBOC: Able to keep the Yuan stable at a reasonable balanced level

WTI technical analysis: Fades spike to $55.50, eyes bigger drop on bear flag breakdown

UK PM Johnson pledges extra £1.8bn for NHS – Sky News

Key Focus Ahead

The services PMI reports dominate today’s macro calendar on both sides of Atlantic, against the backdrop of the US-China trade tensions and holiday-thinned markets. The Eura area Services PMI readings will start dropping in from 0715 GMT while the UK Services PMI and Eurozone Sentix Investor Confidence numbers will be reported at 0830 GMT.

In the NA session, the US Markit Services PMI and ISM non-manufacturing PMI reports will be published at 1345 GMT and 1400 GMT respectively. The economic releases could play second fiddle to the US-China trade headlines that are likely to remain the main market driver in the coming days.

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Week Ahead: Trade War, Central Banks and Key Data

The week ahead features interest rate decisions from two major central banks, as well as several potentially market-moving data from around the world.