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A renewed risk-aversion wave gripped the markets across Asia this Wednesday, with Trump displeased with the China trade talks and also uncertain about the June Summit with North Korea.  As a result, the safe-havens jumped into demand at the expense of the anti-risk assets such as oil, equities and Treasury yields.

On the fx front, the Yen emerged the clear winner amid risk-off markets that sent the Yen crosses sharply lower while both the Antipodeans were broadly dumped. The Kiwi slumped below the 0.69 handle, as markets digested RBNZ’s dovish comments, floating negative cash rates. Its OZ neighbor, the AUD, slipped to test the 0.7530 levels on weaker construction output data, as risk-off continued to undermine.

Among other related markets, the Asian markets felt the heat from the revival of geopolitical tensions, with the Nikkei 225 index leading rest of Asia lower. Meanwhile, both crude benchmarks also kept losses, after the API data showed a gasoline stocks build. Gold prices on Comex treaded cautiously above the $ 1290 mark ahead of the FOMC minutes release.

Main topics in Asia

USD/TRY: Lira extends decline, currency meltdown continues

The USD/TRY has driven higher in the overnight session, spiking to a high of 4.7960, the pair’s highest recorded value.  

RBNZ: Doesn’t see a ‘significant’ decrease in cash rate                

The Reserve Bank of New Zealand (RBNZ) is out with a note on ‘unconventional monetary policy’, or policy measures since the financial crisis of 2008-09.

US President Trump tempers investor optimism over US-China relations – Reuters

US President Trump is cooling off optimism regarding the recent goodwill between the US and China over their ongoing trade negotiations.  

RBNZ’s McDermott: Currently no prospect of unconventional monetary policies

The Reserve Bank of New Zealand (RBNZ) Assistant Governor and Head of Economics John McDermott was on the wires last minutes, via Reuters, making some comments on the monetary policy in an interview.

Trump: Will propose new tax cuts prior to November – Reuters

The US President Donald Trump said late on Tuesday that he will propose new tax cuts sometime prior to November, before the US Congress in midterm elections, Reuters reports.

Asian stocks drop as risks resurface    

Asian stocks dropped on Wednesday as investors took note of the renewed geopolitical tensions.

WSJ: Trump weighs 10 pct cut in EU steel, aluminum exports to US – Reuters

US President Trump is considering a 10 percent reduction in steel and aluminum imports from the European Union, the Wall Street Journal report said, citing EU officials familiar with the talks.

Key Focus ahead

Today’s macro calendar in Europe, brings cheer to the EUR, GBP traders, as they brace for an eventful session after a quiet start to this week.  A flurry of flash manufacturing and services PMI reports will be released from across the Euro area economies, with expectations of sluggish manufacturing activity expected to add to the weight on the Euro. Also, of relevance remains the UK CPI data, as it’s used as the central bank’s inflation target. The speech by the RBA Governor Lowe will be also closely eyed for fresh insights on the Australian economy and monetary policy.

The US session also sees the releases of Markit flash manufacturing and services PMI reports while the main risk event for today remains the FOMC May meeting minutes release due at 1800 GMT, with any hawkish undertone likely to fuel a fresh leg higher in the US dollar as well as in Treasury yields.

EUR/USD: Corrective rally remains elusive, focus on preliminary PMIs and Fed minutes

The EUR/USD is now oversold for more than 20 days, as per the 14-day relative strength index (RSI). Still, the corrective rallies remain elusive, possibly due to the political uncertainty in Italy.

GBP/USD getting comfy around the 1.34 handle ahead of the UK CPI

The big figures for today will be the UK’s CPI figures, with the year-on-year Core Consumer Price Index for April expected at 2.2%, a slight contraction from the previous reading of 2.3%.

RBA’s Lowe will be carefully listened to, given the global focus on US trade – NAB

Analysts at National Australia Bank (NAB) outline what the Reserve Bank of Australia (RBA) Governor Lowe will comment in his speech about China’s economy, financial system, and the implications for Australia due today at 0805 GMT in Sydney.

Key market moving events today – Barclays

The Barclays Research Team offers a sneak peek into today’s key market moving events, which include the UK CPI report due at 0830 GMT and  FOMC May meeting minutes  scheduled for release at 1800 GMT.