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Trade still dominates

Published September 2, 2019

By Nicholas Cork

The USD index powered to its highest level since May 2017 as the EURO sunk to its lowest since May 2017, breaking below the psychological 1.1000 level, compelling Trump to comment that the euro area now has “a big export and manufacturing advantage.” AUD, NZD, and YEN managed to hold on to Friday’s levels. As a result, some gains were made on AUD and NZD cross rates. US yields were mixed as portfolio rebalancing was seen as the US headed into a long weekend to celebrate Labor Day.

AUD and NZD may find it difficult to make gains today as the US-CHINA trade took a step backward on the weekend after both began imposing more tariffs, with China’s levy of 5% on US crude marking the first time the fuel has been targeted since the Trade War began. The US will begin collecting 15% tariffs on more than $US125 billion in Chinese imports, including smart speakers, bluetooth headphones and footwear. In retaliation, China started to impose additional tariffs on some of the US goods on their $US75 billion target list but did not specify the details, however, the extra tariffs of 5% and 10% were levied on 1,717 items from a total of 5,078 products originating from the US. China had asked the US to cancel the tariff increases but said last week that a September round of talks was being discussed between the two still offering a glimmer of hope. The Chinese official news agency did not hold back, saying that “The United States should learn how to behave like a responsible global power and stop acting as a ‘school bully. As the world’s only superpower, it needs to shoulder its due responsibility, and join other countries in making this world a better and more prosperous place. Only then can America become great again.”

Data to watch today will be the CBA’s PMI manufacturing index for Australia and China also releases their manufacturing PMI. Tonight the same data for the Eurozone, UK, and Germany will be released. Locally, company operating profits and inventories for Q2 will be released but that data will be a little historical. HK protestors continue to raise the stake’s also so keep an eye on further developments.