•The Australian dollar surged on Tuesday after the country’s central bank held interest rates at a record low, while U.S. President Donald Trump’s threat of additional tariffs on Chinese goods kept the yuan under pressure.
Currency markets were mostly quiet at the start of European trading, however, with investors far from panicking about the prospect of a breakdown in negotiations between China and the United States to resolve their trade dispute.
•China’s offshore yuan fell slightly to 6.7781 yuan per dollar after briefly touching a four-month low on Monday of 6.8218.
The U.S. dollar slipped 0.1 percent against a basket of peers, the index down to 97.420.
•“From China’s perspective, a break up in negotiations isn’t really favorable for the domestic economy. I think they want to get a deal one way or the other,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
•The safe-haven yen, which tends to benefit during periods of geopolitical or financial stress as Japan is the world’s biggest creditor nation, was little moved at 110.715 yen on Tuesday after briefly touching a five-week high on Monday.
The euro rose to $1.1215, up 0.1 percent.
•Reserve Bank of Australia keeps rates on hold, Aussie spikes to 0.7045
The Reserve Bank of Australia (RBA), at its May monetary policy meeting held this Tuesday, made no adjustment to its official cash rate (OCR) and maintained it at a record low of 1.50 percent for the thirtieth straight meeting, disappointing the hawks big time.
The RBA statement read: “The Board judged that it was appropriate to hold the stance of policy unchanged at this meeting. In doing so, it recognised that there was still spare capacity in the economy and that a further improvement in the labour market was likely to be needed for inflation to be consistent with the target. Given this assessment, the Board will be paying close attention to developments in the labour market at its upcoming meetings.”
•USD/JPY on the backfoot near 110.70 amid negative S&P 500 futures
We had a brief scare on trade comments from Mnuchin and Lighthizer which knocked-off USD/JPY pair in Asia, down to 110.65/70 levels from a touch away from 111.00 in the overnight trades while markets stay on red alert despite sentiment that a deal will be struck at the eleventh hour.
The pair has spent most of the last two sessions consolidating around the 110.80 level, maintaining the bearish tone according to the 4 hours chart, as it is developing well below its moving averages, and with the 20 SMA gaining bearish traction below the larger ones. In the mentioned chart, technical indicators have bounced from extreme oversold territory but turned flat well into negative ground, indicating absent buying interest. The upside would look a bit more constructive if the pair manages to advance beyond 111.10, where it closed last week.
Support levels: 110.60 | 110.25 | 109.90
Resistance levels: 111.10 | 111.45 | 111.85
•China’s commerce ministry said on Tuesday Vice Premier Liu He will visit the United States on May 9 and May 10 for bilateral trade talks at the invitation of senior U.S. officials.
The ministry did not elaborate on the talks or give the expected topics of discussion.
•Warren Buffett said on Monday that a trade war between the United States and China would be “bad for the whole world.”
Buffett spoke after U.S. President Donald Trump tweeted on Sunday that he will raise tariffs on $200 billion of Chinese imports to 25 percent from 10 percent beginning on Friday.
•The United States will impose a 17.5 percent tariff on Mexican tomato imports starting on Tuesday, as the two countries were unable to renew a 2013 agreement that suspended a U.S. anti-dumping investigation, a Mexican official said on Monday.
The U.S. Commerce Department said in early February that the United States would resume an anti-dumping investigation into Mexican tomatoes, withdrawing from a so-called suspension agreement that halted the anti-dumping case as long as Mexican producers sold their tomatoes above a pre-determined price. U.S. growers and lawmakers say that deal has failed.
•A Brexit breakthrough in talks between Prime Minister Theresa May’s government and the opposition Labour Party is possible but unlikely this week, the BBC’s political editor cited an unidentified senior government source as saying.
“Senior govt source says it IS possible though to see a way to a deal, but unlikely to be resolved this week,” the BBC’s Laura Kuenssberg said on Twitter.
The aim is “to set out a path to get the Withdrawal Bill to Commons with a fair wind,” she said.
•Turkish authorities on Monday scrapped the result of a vote for Istanbul mayor lost by President Tayyip Erdogan’s candidate, responding to calls by his AK Party for a re-run, in a move that hit the lira and drew opposition accusations of “dictatorship.”
Turkey’s main opposition Republican People’s Party (CHP), which narrowly won the mayor’s office in the country’s largest city, called the ruling a “plain dictatorship.”
•Oil prices were mixed on Tuesday, pressured by concerns that the escalating Sino-U.S. trade dispute could slow the global economy, while U.S. sanctions on crude exporters Iran and Venezuela helped keep the market on edge.
Brent crude oil futures were at $71.12 per barrel at 0710 GMT, 12 cents, or 0.2 percent, below their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $62.30 per barrel, 5 cents above their last settlement.
Reference: Reuters, CNBC , BBC, FX Street
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