While there was no one catalyst for a sell-off yesterday, it is clear that tensions between the US and China remain at all-time highs.

As a result, the SPX gave up around -1.2% and dragged everything down around it across the globe. There was a clear risk-off feel and GOLD of course was higher on the session.

PMI was a bit of a miss and weighed on the USD while both home sales data and employment claims were only marginally off the consensus.

Elsewhere, the New York Federal Reserve posted a blog post looking at the cost of Trump’s tariffs on Chinese imports.

“Studies, including our own, have found that the tariffs that the United States imposed in 2018 have had complete passthrough into domestic prices of imports, which means that Chinese exporters did not reduce their prices. Hence, US domestic prices at the border have risen one‑for-one with the tariffs levied in that year. Our study also found that a 10 per cent tariff reduced import demand by 43 per cent.”

Clearly, that is a huge impact on the Chinese and quite likely why they are starting to get aggrieved by what is going on. At the same time, if they are not interested in doing a deal then that is another question entirely.

The ECB Minutes came and went and the member acknowledged that there is a protracted soft patch at the moment, but they also feel that there is a more solid growth rate to come in the second half of the year, while risks are slanted to the downside.

Amongst all of that the USD was higher early in the US session but fell away late, and closed below 98.00. Price actually tested 2019 highs, before getting smacked down – which is saying something about the sellers above.

The DXY has really been struggling at this resistance level, despite all the US-China carry on at the moment.

Asian Outlook

The AUD/USD and NZD/USD didn’t get hit too hard on the risk-off session and in fact, both bounced off the lows, in what was a bit of surprise.

The calendar is thin today but the trade balance data for NZ showed a slight miss at 433m vs 450m expected.

The USD/JPY continues to see safe-haven inflows at the moment and that will likely continue until there is some more clear direction by leaders from both sides.