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The risk sentiment got hit again by fresh comments by the US President Trump on trade, citing that “China broke the deal” on the trade talks, The safe-haven Yen received a fresh lift at the expense of the risk assets such as Treasury yields, stocks and the Antipodeans.

The USD/JPY pair quickly surrendered the 110 handle on Trump’s trade risks and hit fresh lows near 109.80 region. The Antipodeans also felt the heat of the renewed risk-off wave, with the Aussie having dipped to 0.6970 lows, despite in-line with estimates Chinese CPI and above-forecast PPI numbers. The Kiwi also traded on the back foot, sticking to lows near 0.6570 levels. Meanwhile, the Loonie headed back towards the 1.35 handle amid the sell-off in oil prices.

Amongst the European currencies, the EUR/USD pair traded modestly flat, capped by the 1.12 handle amid declines in EUR/JPY and USD/CNH crosses and listless trading seen in gold prices. The Cable regained the 1.3000 barrier, but lacked further upside momentum amid ongoing UK political uncertainty surrounding the Brexit deal and as markets look forward to the two-day US-China trade talks commencing later today.

Main Topics in Asia

US-China trade updates

Chinese sources: No more ground in the face of US Pres.Trump’s tariff threats – SCMP

Some solace for U.S. businesses;’US to exempt Chinese goods in transit from potential tariff increase’ – FT

Trump says China `broke the deal’ – Risk-off sending Aussie and yen lower

Brexit/ UK political updates

UK PM May promises new vote on Brexit deal in next two weeks – Financial Times

Post-Brexit customs union would make UK 3% poorer – NIESR

Other headlines

WTI: US-Iran rift, EIA data fail to counter trade pessimism

BOJ’s Kuroda: Will take time to hit 2% price target

BOJ’s Kuroda: Slowdown in bond purchases is different from tapering

Asian stocks trade in the red as Trump says China ‘broke trade deal’

RBNZ’s Orr: Too early to tell if another cut was needed

Key Focus Ahead

The economic releases will continue to play a second fiddle to the developments surrounding the US-China trade talks and UK politics, with the former likely to remain the key market driver The fx space await the outcome of a fresh round of trade talks between the Chinese Vice-Premier Liu He and the US top diplomats later today. On the data front, however, we have the only Spanish industrial output figures, which is likely to have virtually no impact on the EUR markets.

The NA calendar remains eventful, with a slew of macro news from the US docket, including the key PPI, trade balance and weekly jobless claims, all of which will drop in at once at 1230 GMT. At the same time, the speech by the Fed Chair Powell will hog the limelight, as Canada will also see its trade and house price index data. Later on, the US wholesale inventories data will be reported at 1400 GMT, soon after the Fed member Bostic’s speech due at 1345 GMT. The speech by the Chicago Fed President Evans will also be eyed fresh trading impetus.

EUR/USD: Sideways action to continue amid EUR/JPY slide and CNH sell-off

With both EUR/JPY and the Chinese Yuan hitting four-month lows, the  EUR/USD  pair may continue to trade in a sideways manner around 1.12. The sell-off in CNH, a global anchor, will likely keep the USD better bid against most majors.

GBP/USD: UK politics, trade to drive sentiment, 200-day SMA in spotlight

With the UK politics providing a little clarity over Brexit/PM May’s position, caution ahead of the US-China trade negotiations offered fewer moves to the  GBP/USD  pair ahead of the London open on Thursday.  

The impact of the US/China trade talks in equities and currencies

The long term effects of a trade confrontation between the US and China are more varied in the currencies than in the equity markets, where the impact is almost universally negative.

Gold Technical Analysis: On the verge of a correction to the downside if laws of channel gravity play out

Gold is on the verge of a correction to the downside if indeed the rice respects the descending wedge’s and the interim channel’s laws of  gravity. Bears got to be liking that bearish shadow at the top of the channel aligned with stochastic resistance.