Forex today: risk aversion comes back, tariffs lead markets lower

Forex today saw risk appetite sour on Monday's trading in the US session after the Easter long weekend kept most of the European and Asia markets out of the action for Friday and Monday. As we head into another Non-Farm Payrolls week, the focus is going to turn away from macro indicators and the underlying fundamentals as geopolitical turmoil continues to take the top off of risk assets across the broader market.

US indices closed lower with the S&P 500 shedding over two percent, hitting a low of 2,552.00 before rebounding late in the day, but still closed in the red near 2,580.00. The Dow Jones Industrial Average also stepped lower, losing two percent and closing lower at 23,623.00 after dipping to 23,340.00, while bond yields also sank back into two-month lows.

The embers of a potential trade war between the US and China are beginning to brighten, and traders are feeling increasingly uneasy following China's tariff announcement late in the weekend that sees levies posted on a wide array of American-made goods, ranging from pork to fruit products, though the move was widely telegraphed by their announcement last week. 

Asia today

Risk aversion has seen the Yen gain once again, and the USD/JPY is sinking back into previous weeks' ranges, falling into 105.70 from Monday's high of 106.45. Tuesday's macro calendar is clear of Japan data, but risk events are still possible as the Japanese government is still grappling with the government land sale scandal.

The Aussie and the Kiwi both backslid against the US Dollar, with the AUD/USD hitting a low of 0.7650 and the NZD/USD dropping to the 0.7200 handle heading into Tuesday. Today will be seeing a Rate Statement from the Reserve Bank of Australia (RBA), but markets have already priced in a lack of movement from the central bank for the rest of the year, and any movement will be based on the finer details embedded in the RBA's statement.

Europe today

The European continent comes back online later today after taking Monday off for the Easter long weekend, and traders will be faced with a slew of Markit PMIs from across the European Union, as well as German Retail Sales at 06:00 GMT, finishing off with Eurozone average PMIs at 08:00 GMT. The UK meanwhile has a lighter macro schedule lined up, with only the Markit Manufacturing PMI due at 08:30 GMT. The major focus for Europe this week will be the EU CPI indicators dropping on Wednesday at 09:00 GMT, where the headline preliminary year-on-year figure is expected to print at 0.9 percent, a slight decline from the previous reading of 1.0 percent.

Further reading from Monday:

AUD/USD analysis: heading into RBA meeting at yearly lows

It’s payrolls week

China Moves to Neuter King Dollar in International Trade

Market Talk- April 2, 2018