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Despite news that calmed nerves and enabled commodity-FX, USD/JPY and various risk assets to pare back losses, to some degree if not in full,  risk-off is back in play this Asia with comments filtering through from both  Mnuchin and  Lighthizer with respect to Trump’s threat to raise tariffs on Chinese imports this week.

Reuters brings the comments as follows …  

U.S Treasury Secretary Mnuchin:

  • China moved away from the language in the agreement that would have changed it substantially.
  • The entire economic team is unified in recommending to trump that the U.S  go ahead with tariffs if there is not an agreement by Friday –
  • had hoped to conclude a deal by the end of this week one way or another
  • Not going to negotiate to go backwards, says we have negotiated in good faith.
  • If we hear something different from the Chinese this week, we will report that to Trump.
  • The reaction by the stock market is not playing into consideration about the tariffs.
  • If the Chinese changed position, the US  would be willing to keep talking.
  • It would be unfortunate if we cannot conclude an agreement.
  • There were communications over the weekend that moved the agreement substantially backward.
  • We were in the process of planning a summit with trump and Xi.

Lighthizer:

  • Over the course of the last week we have seen an erosion in commitments from China.
  • China was reneging in commitments.
  • Over the last week or so the Chinese pulled back, and that was what precipitated trump’s tweet.
  • Continuing talks, China delegation will be here Thursday and Friday.
  • Expects that the Chinese vice premier will attend the talks on Thursday and Friday.
  • Trump would like a deal with substantial structural changes, that is not where we are right now.
  • Will probably put out a notice on Tuesday about the increase in tariffs to 25%on $200bln of Chinese goods.
  • Does not want to speculate on the timing of a potential deal.
  • Have not talked to the vice premier in the last 24 hours.
  • Have to have specificity in the agreement to make it enforceable.
  • There will be an exclusion process for the tariffs to deal with companies’ difficulties.

Market moves:

Nothing like yesterday’s initial knee jerk spikes, but..

  • USD/JPY is -0.12%.
  • AUD/USD is – 0.08% .
  • AUD/JPY – 0.13%.
  • WTI is shedding 10 cents.

USD/JPY 5min chart