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Risk-off trades seeped back into Asia, as sentiment still remained fragile amid resurgent US-China trade tensions fuelled by the US President Trump’s recent tariff threat while the comments by the US Treasury Secretary Mnuchin and Trade Representative Lighthizer re-ignited fresh trade concerns.

The Yen traded on the front foot amid mixed action in the Asian equities, negative US equity futures and Treasury yields, keeping USD/JPY in a tight range around the 110.70 level, having failed its attempt to regain the 111 handle in the overnight trades. Meanwhile, the AUD/USD pair extended its bounce and rallied 60+-pips to test the 0.7050 upside barrier after the Reserve Bank of Australia (RBA) left its Official Cash Rate (OCR) unchanged at 1.50%. Above forecast Australian retail sales and trade data also kept the buoyant tone intact in the Aussie. The Kiwi, however, failed to benefit from the Aussie rally and remained capped below 0.6630, as the bulls remained cautious ahead of the Reserve Bank of New Zealand (RBNZ) due tomorrow.

Across the Pacific, the European currencies, the EUR and the GBP, traded firmer amid broad US dollar weakness, despite the economic and monetary policy divergence. Meanwhile, the Loonie remained well bid near 1.3400 levels amid a rebound in oil prices. Gold prices on Comex failed to benefit and traded flat near 1283 region, unfazed by looming trade woes.

Main Topics in Asia

Trade wars: Risk-off back in play on Mnuchin and  Lighthizer comments – RTRS

Turning the knife: Pompeo said China is entitled to “exactly nothing” in the Arctic – Bloomberg

Tory MPs ‘will move to oust UK PM Theresa May this week’ if she agrees Brexit deal with Labour – Telegraph

Pompeo: Sees possible ‘escalation’ from Iran – RTRS

Fed’s Kaplan: Trade uncertainity is not yet having material impact on GDP

Fed’s Kaplan: Some recent dips in inflation are transitory

Australia’s trade surplus expands to 4,949 mn in March, beats estimates

Australia’s retail sales rises 0.3% in March, beats estimates

US Official: US VP Pence to warn that US may sanction 25 members of Venezuelan Supreme Court

RBNZ 2-year inflation expectations for Q2 at 2.01% vs. 2.02% prior

Gold struggles to gather upside traction despite trade fears

Reserve Bank of Australia keeps rates on hold, Aussie spikes to 0.7045

Australian two-year yield jumps 10 basis points after RBA decision

Key Focus Ahead

The EUR, GBP traders gear up for the German March factory orders data due at 0600 GMT, with full markets returning after Monday’s May Day holiday in the UK. The German factory orders are expected to rebound on a monthly basis that could offer a further boost to the shared currency. Later in the European session, markets will look forward to the UK Halifax house prices data amid a lack of first-tier macro news. The BOE MPC member Cunliffe’s speech will be also closely heard at 0800 GMT for fresh hints on the interest rates outlook while Brexit-related developments will continue to influence the pound.

In the NA session, the US JOLTS job openings data for the month of March will be reported at 1400 GMT, followed by the Canadian Ivey PMI release and New Zealand’s fortnightly dairy auction results. We also have speeches by the FOMC member Quarles and BOC Chief Economist Haldane scheduled at 1535 GMT and 1630 GMT respectively. At 2030 GMT, oil traders will eagerly await the US API weekly crude stocks data that will wrap up a relatively busy macro calendar today. Meanwhile, markets will keep an eye around the US-China trade developments, with a trade deal could be struck at the eleventh hour.

When are the German factory orders and how could they affect EUR/USD?

A weaker-than-expected release could complicate EUR/USD’s plans to re-test the resistance of the trendline connecting March 20 and April 17 highs. The shared currency may pick up a strong bid and cut through the trendline resistance if factory orders better estimates by a big margin.

GBP/USD on the bids around 1.3120 as Brexit headlines rule ahead of an active day

Looking forward, the UK Halifax house prices and the US JOLTs job openings are likely data that may gain investor attention while Brexit headlines could keep playing background noise.

Tariffs Bring Upside Risks to Inflation Back Into the Fore

Renewed threats to significantly raise tariffs on Chinese imports have brought back upside risk to the outlook for tepid inflation.

Brent technical analysis: Breakout seen on 4H favors test of $72.00

The prices look set to test the 4-hour chart 100-MA, currently located at $72.00. Further gains, however, may not be seen as the downward sloping 10-day MA is located at $71.92.