FX Update: The main currencies have traded with limited directional bias
FX Update: The main currencies have traded with limited directional bias, on net, so far today. The FOMC minutes weren't perhaps quite as dovish as some market participants were anticipating, which inspired a modest rise in the dollar. The minutes showed that "many" believe downside risks had abated, and that low inflation was likely "transitory," though "several" worried that low inflation expectations could become anchored. EUR-USD edged out a two-day low at 1.1143. The yen saw a bout of strength in the wake of the Tokyo fixing, though gains have largely unravelled. USD-JPY printed an intraday low at 110.12 before recouping to near net unchanged levels above 110.30. Yesterday's low at 110.06 has remained untroubled so far. Risk appetite in global markets waned. The MSCI Asia-Pacific (ex-Japan) equity index fell nearly 1% in posting a four-month low. U.S. Treasury Secretary Mnuchin said that proposed tariffs on a further $300 B worth of Chinese imports could be a month away once the impact on U.S. consumers had been studied. The progression from tariffs to direct actions against individual Chinese companies and their supply chains has widely been seen as marking significant rise in the stakes, and many narratives are talking about the trade dispute as transmogrifying into an all-out technology cold war. Two U.S. Navy ships reportedly passed through the Taiwan Strait, which if true would be greeted as an antagonizing move by Beijing. A negative headline reading in Japan's flash May manufacturing PMI also evidenced the impact of the trade war, with Japan's economy being particularly exposed to the crossfire. Sterling looks set on falling to new trend lows today. UK Prime Minister May's revamped Brexit proposal has fully backfired, and her resignation is now widely anticipated (likely on Friday).