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Resurgent US dollar demand across the board was the main underlying theme in Asia this Thursday, as the greenback extended the post-FOMC bounce amid jittery markets amid escalating US-Sino trade tensions.

Among the G10 currencies, the Yen remained well bid amid risk-off trades on the Asian equities and rising 10-year Japanese Government bond (JGB) yields, leaving the USD/JPY pair depressed around 111.60 levels. The Antipodeans traded with moderate losses, with the Aussie losing the most amid mixed Australian trade figures and weaker copper prices. Meanwhile, Cable was offered into the 1.31 handle ahead of the Bank of England (BOE) rate decision while the EUR/USD pair traded modestly flat around 1.1650, despite negative Treasury yields.

Main topics in Asia

Iran seen ramping up military drills amid rising tensions with the US – Reuters

As reported by Reuters, Iran appears to be stepping up the timing of military drills in and around the Gulf as Iran-US tensions continue to simmer away “¦

China warns the US about “blackmailing” over trade – Bloomberg

According to reporting by Bloomberg, China is warning the US to not engage in ‘blackmail’ on foreign trade as the US administration weighs ramping-up tariffs against Chinese goods.

Asian stocks mixed as US-China trade in focus, Chinese equities in retreat

Asian  equities  are falling back on headlines that the US’ White House administration is seeking to bump planned tariffs on China to a higher rate, sending broader markets back on concerns over trade wars.

Australia’s June trade surplus expands beyond expectations to AUD 1873 mln

Australia’s  trade surplus expands to AUD 1873 million in June from the May surplus of AUD 827 million,  according to  Australian Bureau of Statistics (ABS).  

BoJ’s Amamiya: Will take time for inflation to reach 2%

The Bank of Japan (BoJ) Deputy Governor Amamiya is on the wires now, via Reuters, expressing his concerns to achieve the 2% price target.

Japan 10-year yield 1.5-year high

The yield on the 10-year Japanese government bond (JGB) jumped to 0.145 percent – the highest level since February 2017 earlier today and was last seen trading at 0.127 percent.

China State Planner Official: Have ability to deal with external challenges to price stability – Reuters

China’s State Planner Official is out on the wires assuring markets that the world’s second-largest economy has the ability to deal with external challenges to price stability.  

Key Focus ahead

Markets brace for the much-await Bank of England’s (BOE) triple events scheduled at 1100 GMT, with eyes on the all-important interest rate decision accompanied by the minutes of the August meeting and quarterly inflation report (QIR). A 25 bps BOE rate hike is widely anticipated today, but the voting composition and inflation report will be closely eyed, in the wake of the recent downbeat economic data and looming Brexit uncertainty. In focus will also remain the Governor Carney’s speech in order to gauge the outlook on the interest rates in the coming months.

Ahead of the BOE events, the UK will report the July construction PMI at 0830 GMT, which is seen ticking lower to 52.8 versus 53.1 last. Also, the second-liner Eurozone producers’ price index (PPI) data will drop in 0900 GMT.

In the NA session, the weekly jobless claims data from the US will be released at 1230 GMT, followed by the US factory orders data due at 1400 GMT.

EUR/USD continues its struggle to find a direction

The  EUR/USD  could be in for a big move soon, having spent more 1.5-month in the narrowing price range or pennant pattern. A big miss on the payrolls and wage growth figure could trigger a bullish pennant breakout.  

GBP/USD sticking to the 1.31 level as the BoE’s UK rate hike decision looms

Thursday brings the latest Monetary Policy Statement from the  BoE  as well as the central bank’s interest rate call, all dropping at 11:00 GMT; a 25 bps rate hike from the BoE has been highly anticipated, but a recent slump in UK economic data  “¦

The Bank of England Preview: Dovish rate hike set to undermine Sterling’s ground

The Bank of England is expected to deliver the one and only rate hike in 2018 while deciding on monetary policy and publishing the Inflation Report on Thursday, August 2.

US nonfarm payrolls to rise 175k in July – Barclays

The Barclays Research Team is out with a brief preview on Friday’s US labor market report for the month of July that will be published at 1230 GMT.