The United States Dollar is trading with a bit of a negative tinge this morning as risk appetite rises around the world on stimulus news from China.
Overview
Haven currencies in general are depressed today, especially in context of global speculation on further monetary easing from central banks around the world. European stocks advanced in early trading, and US equities look set to follow suit after closing at record highs yesterday, following a heavy docket of speakers from the Federal Reserve that signaled there is likely much more easing to come in the pipeline, though the timing and scale of such movements is still very much in flux.
Overnight, China’s central bank unleashed a slew of policy moves aimed toward restoring GDP to close to the nation’s 5% growth target. The package included a reduction in bank reserve requirements by 0.5% as well as a reduction to a key short-term interest rate, followed by a large stimulus package to the still-ailing property sector that lowered borrowing costs by as much as $5.3 trillion. Rules on purchasing of second homes were also eased. Chinese equities, after performing dismally so far this year, jumped in a major way on the news and positive risk sentiment on the moves is dominating FX markets around the world.
Fed speakers yesterday also helped add to the risk-forward atmosphere, as multiple governors stated that the US economy is in a place that continued easing is appropriate and emphasized that current rates are, in fact, restricting economic growth. Today, however, markets get input from Governor Michelle Bowman, who last week was the first dissenting vote on a Fed decision from a governor since 2005 and first dissent from any FOMC member since 2022. As such, traders will be very keen to hear insight into her decision and how it may impact her vote moving forward through this year and into next.
What to Watch This Week…
- Banxico meeting, Thursday
- US GDP Q2 Final, Thursday 8:30 AM
- US PCE Price Index, Friday, 8:30 AM
- Monex USA Online is always open.
AUD ⇑
The Australian and New Zealand Dollars both jumped higher in overnight trading against the Dollar on the heels of both a massive stimulus package from China and the Reserve Bank of Australia’s decision to hold interest rates steady. In a rather hawkish statement, the RBA board emphasized it will “remain vigilant to upside risks to inflation,” prompting the Antipodean pars to gain more than a third of a percent each against USD. Though a rate hike was not actively considered at this meeting, according to Governor Bullock, this level of continued emphasis on inflation rather than concern over economic growth and employment places the RBA at odds with many of its peers around the world and is giving AUD some room to run.
JPY ⇓
Japanese Yen weakened against the Dollar after China’s stimulus announcements placed a hefty damper on traditional safe haven currencies. Coupled with the PBOC’s moves, Bank of Japan Governor Kazuo Ueda also issued a rather dovish statement reiterating that the BoJ “has time to assess market moves” and look deeper into overseas economies before making any further policy changes toward normalization of its still ultra-low interest rate. JPY, after broaching its strongest level in nearly 14 months at the beginning of last week, has slipped nearly 3% from those highs and is down a third of a percent against USD in Asian and European trading today.
