Risk appetite did not last for long
The last 24 hours have been a choppy one, to say the least, with the news that the US is prepared to delay tariffs of a portion of the Chinese goods set to be levied at 10% at the start of September. However, the market is quick to realise that this is not something which materially changes the outlook on US-China talks ahead, with the move largely made to appease US consumers in the run up to Xmas.
Along with the softer Chinese data out overnight, we have a move back into risk-off mode as a result, with the traditional safe havens back in vogue as both the JPY and the CHF lead from the front. With the EUR being used as a funding currency, there is some support here from carry trade reversals, but this is proving tougher by the day as the Eurozone data continues to disappoint - putting the USD back in favour in terms of spec trade flow.
So far, Wall Street has started on a very weak note, with the major indices all down by significant amounts. This should see the relevant currency pairs under pressure, though USD/JPY is doing its best to hold its ground, as is USD/CHF, which for now is maintaining a foothold on the 0.97 handle.
In contrast, AUD and CAD are the two most pressured currencies, with the CAD underperforming in what looks to be catch up play more than anything else. Both AUD/JPY and CAD/JPY are key losers on the day with both around 1.25% down so far.