TALKING POINTS – YEN, TRADE WAR, AUSSIE DOLLAR, CHINA, NZ DOLLAR, RBNZ
- Yen may reverse gains as US, Japan strike deal avoiding auto tariffs
- Aussie Dollar, Chinese stocks up after record-setting US bond sale
- NZ Dollar down as RBNZ pushes out interest rate hike bets to 2020
The anti-risk Yen also rose as automakers led Japanese stocks lower in Asia Pacific trade, spooked by the prospect of US auto tariffs as negotiators from the two countries meet for talks. While trade war fears have focused on China, a rift between Washington and Tokyo may emerge as another critical flashpoint[1].
The sit-down may follow a familiar playbook. Auto tariffs are deeply unpopular domestically, making them toxic before midterm elections and leading President Trump to bargain them away in talks with the EU’s Jean-Claude Junker (as expected[2]). Modest concessions from Japan may yield the same result.
On balance, markets are likely to cheer such an outcome. To the extent that this boosts risk appetite, it seems likely to bode ill for the Yen and perhaps also for the similarly-minded Swiss Franc[3]. Meanwhile, the US Dollar[4] may rise on the back of demand for the go-to yield seeking play in the G10 FX space.
Check out our brief history of trade wars[5] to learn how they may impact markets!
AUSSIE DOLLAR BUOYED AFTER RECORD US BOND SALE
The Australian Dollar[6] gained alongside Chinese stock prices. The currency is often traded as a proxy for developments in its home country’s top export market. The CSI 300 equities gauge was led higher by technology names in
