Trump ready to slap China with tariffs on Friday

Summary:

• US President Donald Trump is likely to finalise a list of imported goods being burdened with levies as soon as Friday
• Reserve Bank of Australia Lowe offers several reassuring remarks
• Asian stocks lower, safe haven currencies slip along with oil prices

Each morning post this week we are beginning with revelations concerning US President Donald Trump, and today is not differently. According to Politico Trump is expected to impose tariffs on Chinese goods as soon as this Friday or next week. Notice that these levies have been already announced, but there has been no specific list of products burdened with additional costs. A final list is to be published on Friday, and if this happens it could aggravate relations between the two countries anew fuelling another wave of concerns rattling financial markets. Do notice that after the summit in Singapore, where Donald Trump and Kim Jong Un agreed to begin a complete denuclearization process, China has let the US know that it played a vital role to arrange this meeting, hence it may continue doing so in order to soften a US stance. However, this is unlikely to stop Trump from slapping new tariffs, and Chinese upbeat remarks could change once a list is released in two days.

The USDJPY keeps surging on the back of improved risk sentiment eyeing a 111 handle as its closest target. Source: xStation5

Meanwhile, on the currency front one may spot that safe haven currencies are lagging behind for the second day in a row even as stocks in Asia are slipping across the board a while before the close. The Japanese yen is the worst currency losing 0.2%, while the Hang Seng (CHNComp) is leading the losses within equity markets in Asia as of 6:43 am BST. Oil prices are also slightly lower in the morning after the American Petroleum Institute informed Tuesday oil inventories built by 883k barrels last week whereas, at the same time, gasoline stocks jumped as much as 2.33 million barrels. It would be a fourth consecutive increase if the EIA confirms these calculations later today. On top of that, there were subsequent revelations with regard to the upcoming OPEC/non-OPEC gathering in Vienna next week. According to a person familiar with Russian thinking Russia plans to propose OPEC and its allies to turn production back to the levels from October 2016, a move which would roll back most of the output cuts within just three months. Brent is down 0.25%, and WTI is falling 0.45% as of 6:49 am BST.

The macroeconomic calendar during the Asian session was virtually empty, so major attention turned to a speech of RBA governor Lowe. During his appearance he said that a next move in rates is likely to be up not down, but not in the near term. Even as he admitted stronger than expected GDP growth in the first three months, he underlines it did not lead to a net increase in labour productivity over the past two years. Lowe indicated that no one should be worried if credit growth slows down a bit, and as long as house price declines are not larger, the situation ought to be manageable. The Aussie has barely responded thus far to say the least as traders are turning their attention toward a May jobs report due overnight. 

The Australian dollar has backed away from its trend line, and keeps heading lower. A possible test of 0.75 might offer an interesting entry point once the greenback continues falling in the aftermath of the Federal Reserve meeting. Source: xStation5