• DXY took a hit and retreated below 96.00 following a renewed tirade by US President Trump
• US President Trump also upped the ante on the trade front by stating he has no time-frame for ending the Chinese trade dispute
• Looking ahead, highlights include Brexit talks in Brussels, UK Foreign Secretary Hunt to speak in Washington and UK Trade Secretary Fox to speak and supply from UK and Germany

ASIA

Asia-Pac markets eventually traded mostly higher although it was far from smooth sailing despite the positive lead from Wall St where stocks edged a 3rd consecutive gain and the S&P 500 finished around 15 points from all-time highs. ASX 200 (-1.0%) was the worst performer and was pressured by weakness in energy, financials and mining names with losses in industry giant BHP following disappointing earnings results. In addition, political uncertainty added to dampened tone in Australia after PM Turnbull survived a leadership challenge, although is still seen to be at risk and some have even suggested to be a dead man walking after 42% of the party voted against him. Elsewhere, Nikkei 225 (+0.2%) was initially dampened by a firmer currency but then gradually recovered, while Hang Seng (+0.4%) and Shanghai Comp. (+1.4%) traded higher as earnings optimism helped shrug-off early indecision from further liquidity efforts by the PBoC and Trump trade pessimism. Finally, 10yr JGBs were marginally lower and retreated back below 150.00 with prices subdued amid an improvement of risk tone in Tokyo, while a mixed 20yr auction also failed to spur demand.

US President Trump said he has no time-frame for ending China trade dispute and does not anticipate much coming from the trade talks with China this week. US President Trump also accused China and Europe of currency manipulation and stated that when the US places tariffs on China, China artificially devalues its currency. (Newswires)

PBoC injected CNY 50bln via 7-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.8360 (Prev. 6.8718)

UK/EU

UK government is to announce a new export strategy today in which it seeks to boost exports to 35% of GDP from 30% last year. (Guardian)

France’s Macron and Germany's Merkel will be meeting in Paris early September to discuss Brexit, according to a French official. (Newswires)

FX

In FX markets, the DXY took a hit and retreated below 96.00 following a renewed tirade by US President Trump on the Fed in which he stated that he disagrees with the Fed’s decision to hike interest rates and that he is not thrilled with Fed Chair Powell for doing so. This underpinned the greenback’s major counterparts across the board with gains in EUR/USD exacerbated on a break through 1.1500 and which saw GBP/USD reclaim the 1.2800 handle to the upside. Elsewhere, USD/JPY slipped below 110.00 for the first time in almost 2 months and the PBoC also took a swipe at the USD by setting a firmer reference rate, while AUD/USD extended on gains but with advances capped amid political risks and an unsurprising RBA minutes.

Australian PM Turnbull survived a Liberal Party leadership challenge by 48 to 35 votes, which was brought on by Australian Home Affairs Minister Dutton who later stepped down. This followed reports that PM Turnbull abandoned his energy policy and conceded the legislation could not pass parliament given the coalition’s 1-seat majority and opposition from within the Liberal Party led by former PM Abbott, which reports had noted casted large doubts over Turnbull’s future as party leader and PM. (SMH/CNBC) 

RBA minutes from August 7th meeting stated the board viewed no strong case for a near-term adjustment in rates and that the next move is likely to be a hike if progress is made on unemployment and inflation, The minutes added the central bank is to be source of stability and confidence by keeping rates steady, while it also noted that AUD had weakened a little but TWI remains within range of last 2 years and that risks of faster Fed hikes could weaken AUD and support the economy. (Newswires)

COMMODITIES

Commodities were mixed overnight with WTI crude futures relatively flat to hold on to the prior day’s marginal gains. Elsewhere, the metals complex was more eventful with gold underpinned by USD weakness following President Trump’s jawboning against Fed rate hikes and with copper supported by the positive risk tone in China which helped the red metal ignore the pressure in Dalian iron futures.

Chinese firms are reportedly shifting to the use of Iranian oil tankers to circumvent potential sanctions on US oil and ensure supply. (Twitter)  

DoE offered 11mln barrels sour crude for sale from the US reserves. (Newswires)

World refined copper market deficit narrowed to 31,000 tons in May from 98,000 tons in April, according to ICSG. (Newswires)

GEOPOLITICAL

UK Foreign Secretary Hunt is said to call for further sanctions from the EU on Russia. (Sky News)

US President Trump said he thought he had a deal with Turkey for Pastor Brunson’s release and that he helped Israel to free a Turkish citizen for the pastor's release. US President Trump said he would consider lifting Russian sanctions if Moscow took steps to cooperate with US on issues such as Syria and Ukraine, while he also stated it is fine if Iranian President Rouhani wants to meet him but that he could not care less if not. US President Trump later added that it is likely will have a 2nd summit with North Korean leader Kim. (Newswires)

US

As US traders were getting to their desks, a slight risk-off sentiment was prevailing, and yields were edging lower. The latest CFTC data released Friday showed specs hold a record net short position in Treasuries, which prompted Doubline’s Gundlach to warn of the potential for a massive short squeeze; attention, therefore is on the general risk sentiment (Turkey is away this week following its Downgrade, for Eid; China related trade news flow seems positive, however) as well as the Fed minutes and Jackson Hole later in the week. Informa reported that buying action today was from real money accounts continuing to buy as tariffs and EM issues remain in the spotlight (though tensions have noticeably eased, broadly speaking). The front part of the curve (2s5s, 2s10s, 2s30s) narrowed, while 5s10s, 5s320s and 10s30s was more-or-less unchanged at settlement. US 10-year T-notes settled 12 ticks higher at 120-20.

US President Trump said he disagrees with the Fed’s decision to hike interest rates and that he is not thrilled with Fed Chair Powell for doing so, while he also said Fed should be more accommodating and should give him some more help. Furthermore, there were earlier reports that US President Trump is said to have been complaining about Fed raising rates and lamented that Powell hasn’t been a cheap money Fed chair which he expected, according to three people familiar with the matter. (Newswires)

Fed's Bostic (voter, dovish) said the economy no longer needs the stimulus it required before and is doing pretty well with GDP strong and the unemployment rate historically very low. Bostic added the Fed is worried about flatness of yield curve, while he also stated the Fed is on a gradual path to get rates back to neutral and that he still favours 3 hikes for 2018. (Newswires)

US President Trump declined to say whether he will undergo interview with Special Counsel Mueller's team which he stated could be a perjury trap. (Newswires)

US Agricultural Secretary Perdue said a trade war is needed to get exports up and to get a level field. (Newswires