China strikes back with tariffs of its own
We have just heard that China is to levy tariffs (reportedly of 5-10%) on some $75bln of US goods. Oil will be among the products to be included in the products on the tariff list, and will be levied at 10%. It will also resume tariffs of 25% on US autos, with China seeing little alternative but to combat the protectionist policies from the US. This puts a fresh light on today's proceedings with markets awaiting the speech from Fed chair Powell, and if his outlook was not hard enough - it just got harder!
The immediate reaction we have seen is a drop in the risk currencies, though the USD has lost a little ground vs the EUR and GBP it seems, but is holding its ground vs the JPY (somewhat suspiciously, it has to be said), with the mid 106.00's holding for now.
The usual suspects however are coming under pressure, with the AUD and NZD pushed lower again as this is now the default sell when the trade wars rear their ugly heads again. The JPY and CHF will likely start to strengthen at some point, but traders are still not seeing this materialise against the USD as we have seen in episodes before.
We can only assume that markets are preparing to hold their ground for Fed chair Powell later on, so we will gauge the ultimate reaction to these events a little later in the day.