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·         The dollar strengthened on Wednesday, sending the Chinese yuan towards recent lows and pressuring the Australian dollar on fears of an imminent escalation in the trade dispute between the United States and China.

The greenback rose 0.2 percent against a basket of currencies before pulling back, while against the offshore yuan gained more than half a percent to as high as 6.8458 yuan, not far from the recent peak of 6.8562

The Aussie dollar, seen as a proxy for Chinese growth because of Australia’s big export sectors, slipped 0.3 percent while a sidelined euro was down 0.1 percent at $1.1682.

Still, analysts said the reaction of currency markets was limited, in part because Trump’s latest batch of proposed tariffs were expected and in part because the trade tensions are yet to have an impact on economic data.

“The [currency] markets have calmed down relatively quickly Maybe the market is underestimating the economic impact of the tariffs and that is why it is keeping calm,” said Thu Lan Nguyen, an FX strategist at Commerzbank in Frankfurt.

Against the yen the dollar rose 0.2 percent to 112.10 as Tuesday’s pledge by the BoJ to keep rates extremely low for an extended period continued to weigh on the Japanese currency.

They include food products, chemicals, steel and aluminum and consumer goods ranging from dog food, furniture and carpets to car tires, bicycles, baseball gloves and beauty products.

The source said the Trump administration could announce the tougher proposal as early as Wednesday. The plan to more than double the tariff rate was first reported by Bloomberg News.

There was no immediate reaction from the Chinese government.

·         The Trump administration plans to raise pending tariffs on $200 billion in Chinese goods to 25% from 10%, a source familiar with discussions confirmed to CNN.

The move, which is not finalized and could change, according to the source, comes as the United States and China remain locked in a trade war. Talks between US and Chinese officials have done little to ease tensions.

The United States has already imposed 25% tariffs on Chinese goods worth $34 billion. China immediately responded with its own tariffs on US goods worth $34 billion.

A second round of tariffs on products worth $16 billion could take effect as soon as this week.

 ·         Manufacturing activity across Asia slowed in July, deepening concerns about the region’s economic outlook as an intensifying trade conflict between the United States and China sent shudders through their trading partners.

A survey of purchasing managers released on Wednesday showed China’s manufacturing sector grew at its slowest pace in eight months in July, with new export orders suffering the worst slump since mid-2016.

Similar surveys revealed slowing activity from Australia to Japan. The shipping container market, in which the vast majority of finished manufacturing goods are imported and exported, shows a similar picture: the Harpex container index CHT-IDX-HARPX has fallen by 10 percent from its highest levels since 2011 hit in June.

·         Talks next week between Japanese Economy Minister Toshimitsu Motegi and U.S. Trade Representative Robert Lighthizer are not a prelude to a two-way free trade agreement (FTA), Japanese Deputy Chief Cabinet Secretary Yasutoshi Nishimura said on Wednesday.

Nishimura also told Reuters in an interview that Japan did not intend to set numerical targets on either exports or imports.

·         Mexican negotiators are optimistic about the possibility of getting a NAFTA deal and are hopeful of progress in coming days, the country’s deputy economy minister said ahead of a second ministerial meeting in Washington later this week.

·         President Donald Trump’s offer of dialogue with Tehran belies a hardening of U.S. policy that intensifies economic and diplomatic pressure but so far stops short of using his military to more aggressively counter Iran and its proxies.

U.S. officials tell Reuters that the goal of Trump’s push is to curb Iranian behavior, which America, its Gulf allies and Israel say has fueled instability in the region through Tehran’s support for militant groups.

Trump has also voiced hope for a stronger agreement with Iran to prevent its pursuit of nuclear weaponry than the 2015 deal between Tehran and world powers which Trump pulled out of in May.

·         An increase in the number of women and seniors entering the job market and a push by companies to streamline operations through automation are keeping Japan’s wages and inflation from rising significantly, the central bank said on Wednesday.

Companies and households are also showing no signs that they are more accepting of price hikes, as prolonged periods of deflation have made them accustomed to low wage and price growth, the Bank of Japan said.

·         China said on Wednesday it will retaliate if the United States takes further steps hindering trade, after a source said the Trump administration proposes slapping 25 percent tariffs on $200 billion of imported Chinese goods.

·         A smattering of European economic data is unlikely to inspire much of a response from financial markets as all eyes look ahead to the FOMC monetary policy decision. A rate hike is not expected but Chair Powell and company may dial up hawkish rhetoric to assert their independence after President Trump talked down tightening efforts recently.

·         Oil prices fell on Wednesday after industry data showed U.S. stockpiles of crude unexpectedly rose, and as economic growth slowed, especially in Asia, amid the escalating trade dispute between the United States and China.

Brent futures dropped 28 cents, or 0.4 percent, to $73.93 a barrel by 0634 GMT, adding to a 1.8 percent loss in the previous session.

U.S. crude futures were down 41 cents, or 0.6 percent, at $68.35 a barrel, having dropped nearly 2 percent on Tuesday.

·         Oil prices faltered in July, shedding value in crude's worst month in two years.

WTI traders continue to be vexed by US oil supplies, which are swinging between expansion and contraction at irregular intervals.

Despite recent price squeezes, namely from the OPEC energy mafia increasing production limits, long-term charts have oil still in a dedicated uptrend, with Daily candles showing crude prices still managing to squeeze further gains from successive higher lows, and bulls will be looking to clip back over the last swing high near the key 70.00 level to take another run at 2018's highs of 75.35, while oil traders on the short side will be looking for a drop below July's bottom of 67.00.