• Beijing said to ready countermeasures to Pelosi’s Taiwan visit, including military actions
• US jet believed to be carrying Pelosi delegation take the long way round to Taiwan
• Chinese foreign minister Wang Yi delivers warning ahead of Pelosi visit to Taiwan
• Dollar and yen hold firmer as US-China tensions weigh on sentiment
• RBA raises cash rate by 50 bps to 1.85%, as expected
• RBA takeaway: Time to slow down?
• UK July Nationwide house prices +0.1% vs +0.3% m/m expected

Markets:

• JPY leads, AUD lags on the day
• European equities lower; S&P 500 futures down 0.6%
• US 10-year yields down 5 bps to 2.55%
• Gold up 0.4% to $1,778.53
• WTI crude up 0.8% to $94.60
• Bitcoin down 0.8% to $22,933

US-China tensions are keeping markets on edge today as all eyes are on US House speaker, Nancy Pelosi’s visit to Taiwan. The aircraft believed to be carrying her delegation is en route to Taipei, taking the long way round after her visit to Kuala Lumpur.

With there being a sense of apprehension and anxiety, safety flows dominated as equities retreated while bonds were bid on the session. Meanwhile, the dollar and yen firmed with the former in particular advancing notably across the board.

EUR/USD fell from 1.0270 to 1.0215 while GBP/USD retreated from 1.2255 to 1.2186 before keeping just above 1.2200 now, but still down 0.2% on the day. USD/JPY itself is down 0.6% to 130.80 levels but is off earlier lows from Asia with the range in Europe being around 130.60 to 130.90 for the most part.

The antipodeans bore the brunt of the risk retreat with the aussie facing a double-whammy after the RBA was seen as less hawkish, opening the door to a slower pace of rate hikes moving forward. AUD/USD fell from 0.7015 to 0.6965 initially before falling further to 0.6915 as risk sentiment deteriorated. Meanwhile, NZD/USD fell from 0.6335 to 0.6275 and is set to snap a run of four straight days of gains.

The focus in the session ahead will be on China’s response to Pelosi’s visit and what comes next in US-China tensions in general. But keep in mind that USD/JPY and the bond market are still going to be key drivers regardless in trading this week.

This article was written by Justin Low at www.forexlive.com.