Westpac analysts are out with Monday’s outlook, and last week’s trade issues are likely to continue driving markets as the new week gets underway.
Key quotes
“The US confirmed news reports that it would implement a 25% tariff on $50bn worth of imports from China. China, in swift response, said it would impose a similar scale of tariffs on US imports. The US statement pre-empted such action by saying that it “will pursue additional tariffs if China engages in retaliatory measures”, so there is no end in sight to punitive trade measures. The US 10yr treasury yield extended a two-day old decline from 2.94% to 2.89% before rebounding to 2.93% near the close. 2yr yields fell from 2.57% to 2.54%. Fed fund futures yields were steady, continuing to price 1 ½ more hikes in 2018.
After heavy losses on the ECB meeting, EUR/USD recaptured a small amount of lost ground, up from 1.1560 to 1.1620 but started Monday trade in Sydney a little softer. This may be linked to deepening tensions within Germany chancellor Merkel’s coalition over immigration. GBP/USD was choppy but overall a touch firmer on Friday. USD/JPY consolidated multi-week gains, ranging sideways between 110.40 and 110.90.
AUD, CAD and NZD underperformed within G10 currencies. AUD/USD extended a week-old decline to 0.7440 – the lowest since 9 May. NZD/USD fell to 0.6928 – a two-week low. AUD/NZD ranged between 1.0710 and 1.0760. USD/CAD rose steadily as oil prices fell, up about 0.7% over the day to 1.3200, a high since June 2017.”
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