Yen and Swiss Franc ended as the weakest ones last week as global stock markets ended higher. There were some jitters in risk sentiments after US announced to move on with tariffs on additional USD 200B in China imports, which come effective as soon as in September. But investors were quickly relieved after China's refrained response. While China still pledged to retaliate, there is no far no detail on the plan, not even leaked. On the other hand, while Dollar ended as the strongest one, the lack of further escalation in trade war limited its strength. Indeed, the late pull-back of the greenback on Friday argues that it's not ready to resume recent up trend yet. Australian Dollar ended as the second strongest as particularly lifted by rebound in Asian markets. Sterling survived resignation of two ministers and Trump's blasting of the softer Brexit plan, ended as the third strongest. Canadian Dollar was just mixed as the lift by hawkish BoC rate hike was offset by the sharp fall in oil price. Going through all the noises, the main development last week was the weakness in Yen and Franc. That was primarily built on strength in global equities. In particular, NASDAQ hit record highs as it resumed the larger up trend. Near term strength in equities is anticipated. There could be some more positive news as European Commission President Jean-Claude Juncker visits China and Japan on Monday and Tuesday. China is known to look into EU to expand partnership on trade and investment, and on other issues like climate change. Juncker will also sign an Economic Partnership Agreement with Japan during the visit. However, it should be noted that the risks of trade war is just temporarily taking a back seat and a lot of development is happening. The section 232 investigation in auto tariffs is undergoing and could be completed in weeks. That will be a huge blow to European and North American car industry. And China could be ready to step up with its rhetoric again once stocks rebounded to a level that's comfortable for investors to see another selloff. So, for now, we don't anticipate risk appetite to stay long. |