The United States Dollar starts this morning’s session on the back foot against most majors after China announced plans to stimulate its sputtering economy overnight.
Overview
Though without specifics, the announcement was quite welcome from the world’s second-largest economy, whose recovery from its zero-Covid policies has been lackluster at best. When compared with a surprisingly strong performance from the US through the first half of the year, Chinese growth has faded sharply after the first quarter of this year. Premier Xi Jinping’s actions boosted risk sentiment and drove down demand for the Buck. Asian stock indices ripped higher overnight, while European stocks fell slightly, and the US is set to open close to flat.
Out of Europe, the ECB’s summit at Sintra kicked off this morning with words from Christine Lagarde, who doubled down on the central bank’s current path. While a hike in July was already widely expected, Lagarde took the possibility of a cut in early 2024 essentially off the table. By stating that “it is unlikely that in the near future, the central bank will be able to state with full confidence that the peak rates (sic) have been reached,” she firmed up prices for EUR and other European currencies, boosting investor confidence in the region in her strongest statement against inflation yet.
Today’s mood can be solidly characterized as risk-on, driving demand away from USD. Though investors do currently expect one more hike from the Federal Reserve at the end of next month, GDP data released Thursday morning from the US will be pivotal in charting out the Fed’s path through the end of the year and by extension, demand for USD.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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AUD ⇑
Australian Dollar is gaining back some of last week’s lost ground this morning against USD on the heels of Xi Jinping’s announcement of Chinese economic stimulus. The People’s Bank of China also stepped up its support levels for Yuan prices. Because of Australia’s strong ties to the Chinese economy, these actions out of China are boosting demand for AUD as well as NZD, with the former posting a gain of half a percent on the day. The effects of any stimulus remain to be seen, but if China can turn around its lackluster recovery we expect AUD strength through the remainder of the year. USD.
CAD ⇓
The Loonie finally faced a bit of weakness this morning after posting gains against USD for the last week, falling roughly a quarter of a percent. Inflation data out of Canada showed a return to slowing price growth, a welcome sign after the Bank of Canada was forced to restart rate hikes earlier this month. Coming at 3.4% year-over-year in May following April’s shock 4.4% reading, this represents a marked decline and gives the central bank some breathing room.
