Summary:

• US President Donald Trump plans to impose tariffs on Chinese goods being worth up to $60 billion, according to people with direct knowledge of the matter
• A package of macroeconomic readings from China beats forecasts except for retail sales
• NZ dollar trades a notch higher despite a slight miss in balance of payments as investors await GDP later today

The US 10Y yield neared 2.8% yesterday evening after the newest revelations with regard to tariffs being imposed by Trump’s administration. According to people with direct knowledge of the matter US President Donald Trump is seeking to impose fresh tariffs on Chinese goods including consumer electronics, telecoms and apparel and more being worth combined up to $60 billion in retaliation for an intellectual property investigation begun in August last year. They said that new tariffs “could come in the very near future”. On top of that, there is also the likelihood Trump will want to impose investment restrictions on Chinese companies, however, those informations have yet to be confirmed by the White House. What does it actually mean for global trade and thereby the entire economy as well? So, while tariffs imposed on steel and aluminium were not directly targeted at China and therefore any quick responses from Beijing were unlikely, this time is different and on that account one may expect the second largest economy in the world will not wait too long before responding. Thus, if China retaliates it could reignite concerns about a global trade war weighing on equities all around the world.

In response to the China’s thread Wall Street ended the day with losses where the NASDAQ (US100) was afflicted the most slipping a touch more than 1%. Technically the index could test its closest support area localized at around 7000 points where some buyers could consider entering the market anew. Source: xStation5

Looking beyond US politics it’s worth mentioning a torrent of macroeconomic data from the Chinese economy for February. Industrial production grew 7.2% yoy beating the median estimate at 6.2% yoy, fixed asset investments climbed 7.9% yoy against the consensus at 7% yoy while retail sales came in at 9.7% yoy, subtly below the expected 9.8% yoy – all prints in a year-to-date basis. The better than expected readings could have helped the Australian dollar to some extent which is the best performing currency in early trading on Wednesday. Having said that, the Aussie could find itself under renewed downward pressure when a trade clash between the United States and China continues unfolding.

The Chinese economy printed promising readings for February, however, a political battle with the US is expected to outweigh macroeconomic fundamentals in the nearest future. Source: Bloomberg

The last point being worth writing about seems to be the NZ dollar as it’s the second best performing currency in the G10 basket. Admittedly, the kiwi got a slightly feebler than forecast balance of payments release (the deficit turned out to be marginally higher) everybody zooms in on a GDP print scheduled for today evening. GDP growth for the fourth quarter is anticipated to come in at 3.1% in a year-over-year basis up from 2.7% seen in the third quarter.

The NZDUSD appears to be getting closer the levels we wrote about several days ago. When the pair reaches its nearest supply area it could incentivize some buyers to cash in on their latest longs, hence a possible selling wave might be probable. Source: xStation5