Forex today: Kiwi below 0.67 handle on RBNZ, dollar mixed, running out of steam, 10-yrs stick below 3.00%

• Forex today was hit with a new round of trade war fears as China stepped up to the plate and gave the US a taste of their own medicine, a medicine that economist don't have too much confidence when it comes to world economic growth. 
• These latest tit-for-tat moves have accumulated levies on $50bn of goods moving each way between the two countries.

The Chinese government unveiled fresh tariffs on $16bn of American goods which included medical equipment, fish meal, wood waste, paper and paper waste, metal scraps, cars, fuels, and bicycles - this was in retaliation against Washington’s decision to add further tariffs on an extra $16bn of Chinese goods on Tuesday. 

As a result, the dollar was trading mostly lower within the choppy summer markets and through various crosscurrents stemming from the RBNZ, NAFTA, the Middle East, the Chinese Yuan and hard Brexit talk.  The DXY traded between 94.9940-95.4170, lower in the European session, high in the North America morning session and then hitting a brick wall where observers are wondering whether the dollar has now run out of steam - US yields have been unable to push through the 3% mark  - although the US Treasury 5yr/30yr spread was the best in two months - a sign of economic recovery gaining momentum in the US.  

The US 10yr treasury yields were steady and ranged sideways between 2.96% and 2.98%. The while 2yr yields ranged between 2.66% and 2.67% and the Fed fund futures yields continue to price almost two more full hikes in 2018. 

Currency action

As for the other currencies, the euro was floating around desks in the vicinity of 1.16 the figure, stalling close the 10-D SMA (1.1632) on the back of the DE-US spread widening again. the more the single unit fails to maintain momentum towards the 1.17 handle, the MAs are aligned bearishly and the market is inclined to offer on the basis of a hardening US economy and the prospect of higher rates, in stark contrast to that of the EZ where the German data has been a disappointment of late and today's softness in Spanish and Italian numbers underpins  the divergence trade between the two central banks - 1.1500 will be back in play the more the euro struggles below the 1.1850 mark on the wide.  

GBP/USD was falling on hard Brexit sentiment again, dropping from 1.2960 to 1.2854 as being the lowest level traded since August 2017. Sterling ended the North American shift at 1.2892 lower by 0.37% from within the NY range between 1.2960-1.2854. Risk reversals show greater protection against sterling weakness. Meanwhile, the cross was up on the Brexit pessimism in markets. EUR/GBP rallied 0.53% to 0.9010 within Wednesday's range of between 0.9018-0.8962.  USD/JPY was consolidating yesterday afternoon’s drop below the 111 handle to a low of 110.85 - the first time the pair had crossed that level since 30th July (on a drop in 10-yr Tsy-JGB spreads) - however, more importantly, the price pierced below the rising trend line support again and was on the approach to the rising 50-D SMA at 110.80 -  closing the gap on the uptrend defining 55-DMA at 110.69 (stop territory).  AUD/USD was pressured by the China tariff headlines despite a weaker dollar on a hardened Yuan - falling from 0.7430 in London to as low as 0.7383 on heavy commodity prices. Copper was sold off but steadied and stabilised in NY helping the Aussie recover back above 0.7430 for the NY close at 0.7426 - eyes turn to Chinese CPI and the Yaun fixing.  As for the Kiwi, traders see little reason to hold onto the bird now after the RBNZ announcements, lowering their OCR forecasts after leaving their cash rate at 1.75% as widely anticipated. the bord was sent lower to test the bulls commitments at 0.67the figure with a low fo 0.6698 scored.

Key notes from the US and early Asia sessions:

• NZD/USD has dropped to test the bulls commitments at 0.67 the figure on the RBNZ

Key events ahead in Asia:

Analysts at Westpac offered their outlook for today's key events:

• Australia’s calendar is quiet ahead of the RBA quarterly statement tomorrow.
• China releases July consumer and producer price data. Consensus is for CPI to tick up to 2.0%yr, PPI to ease to 4.5%yr. Markets should be relaxed about the data given that inflation is not a barrier to monetary policy adjustment.