Dollar holds gains as market awaits tariffs

It’s not will they or won’t they – it’s how much

The market appears resigned to the fact that US President is about to announce the next set of tariffs on $200 billion worth of Chinese imports. There are only two questions to be answered: when? Is it today, tomorrow or later this week? And what percentage? 10% or 25%?

The Wall Street Journal reported that the tariff level will be about 10%, below the 25% the US administration had been considering. The WSJ also reported that there is a growing risk that China would walk away from the proposed trade talks if the tariffs are imposed. After imposing their own retaliatory tariffs, of course.

The US dollar was steady in thin trade during the Asian session. With a Japan holiday and Hong Kong licking its wounds from the passing of typhoon Mangkhut, though financial markets were open, trading was lackluster at best.

USD/HKD gives 7.85 ceiling a breather

USD/HKD retreated from its 7.85 ceiling last week as the US dollar encountered some mild near-term selling pressure. The Hong Kong Monetary Authority has spent HKD95.63 billion ($12.2 billion) defending the upper band of its currency peg since April as the FX pair repeatedly tested the 7.85 level. General demand for the US dollar and outflows from its stock markets are to blame for the pressure. The HKMA commented this morning that it can better deal with any crisis better than in 1997 and 2007. USD/HKD is trading at 7.8578 today after touching 7.8460 on Friday, the lowest since July 26.

USD/HKD Daily Chart

Source: Oanda fxTrade

HKMA Intervention

Source: Bloomberg; Oanda

Euro-zone consumer prices on tap

It’s a slow start to the week on the data front too, with Euro-zone CPI data for August the major event on tap. Prices are seen rising 0.2% m/m and 2.0% y/y, according to the latest survey. Canadian flows data, foreign money into Canadian securities and Canadian money into foreign securities are the only other major data points for markets.

You can view the full MarketPulse data calendar at: https://www.marketpulse.com/economic-events/

Source: MarketPulse

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