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Collinson FX: Sept 19, 2018 - US/China Trade War impacts NZD

by Collinson FX 19 Sep 2018 06:28 PDT 14 September 2018
Wild Oats XI in Dent Passage heading for the finish - Hamilton Island Race Week - Day 6 © Richard Gladwell

Collinson FX: Sept 19, 2018 - US/China Trade War impacts NZD

US equity markets surged, despite the US/China trade developments, as the tariffs levied were lighter than expected. The US imposed 10% tariffs on $200 Billion on Chinese goods, rising to 25% by years end, while the Chinese response was minimal. The Chinese imposed a 10% tariff on 5,000 US goods in retaliation. Trump tweeted the Chinese plans to politically target Trump supporters with their tariffs (farmers etc) would fail, but reveals the extent of Chinese targeting rand the depth of planning in this trade dispute. The balance of trade means there can be only one winner and this is a battle over timing and dividend.

The Dollar remains soft, with the EUR progressing to 1.1670, while the GBP trades 1.3150. Australian House prices continue to contract, as discussed by the RBA in their last statement, with high debt levels and rising interest rates taking their toll. This remains a substantial threat to the Australian economy, but the easing reserve allowed the AUD to regain 0.7200, while the NZD pushed up to 0.6580. The US/China trade war directly impacts these trade exposed currencies, while NZ Consumer Confidence and Current Account data may impact the currency at the margins, today.

Collinson FX: Sept 18, 2018 - Trade war rhetoric rises

The US/China trade war continued with rhetoric rising. Key Trump financial adviser, Larry Kudlow, reiterated Trump’s dissatisfaction at the progress made, to date. Trump twittered that that the US was in a strong bargaining position, on trade, and failure to deal would result in the counterparty to be ‘Tariffed!’

Equity markets were soft, while the Dollar retreated, as EU CPI was steady around 2% p.a.. The Dollar retreated, with the EUR charging to 1.1680, while the Yen hit 112.00. Commodity currencies reacted to the flagging reserve, with the AUD pushing up to 0.7180, while the NZD traded 0.6580. These trade exposed currencies remain hostage to the China/US trade negotiations, driving uncertainty and vulnerability, awaiting an outcome. A resolution may see a substantial rebound, although continued disagreement undermines their positions, adding to recent susceptibility.

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