From Marc Chandler at Bannockburn Global Forex:
While what has been dubbed China Shock 2.0 as the Chinese model moves into higher value-added goods is important, the most immediate challenge facing investors is the double shock from the US in the form or tariffs and war. And both are impacting the capital markets today. More clashes between the US and Iran have been reported, which are underpinning oil prices and lifting bond yields. At the same time, the US is threatening new tariffs of at least 10% on imports from 60 trading partners over how goods allegedly from forced labor are handled. This levy would ostensibly apply to Canada, Mexico, the EU, Taiwan, and UK, while China, Japan, India, South Korea, Brazil, and Switzerland would face a 12.5% tariff. A public comment and review period is planned to run into early July before implementation.
The US dollar is firmer against most of the G10 currencies. The two exceptions are notable. The Norwegian krone is the strongest and may be helped by the gains in oil prices. The yen is the other exception. While comments by BOJ Governor Ueda saw the swap market lift the chances of a rate hike later this month, officials said little new about the weakness of the yen. The greenback tested JPY160 without moving above it, which is its best level since the late April intervention. It is hovering a little below it ahead of the North American session....
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