After US markets were closed for the Independence Day holiday yesterday, this morning’s session opens with a slight bit of strength across the G10 for the United States Dollar.
Overview
Naturally, little news came from the domestic market yesterday, but the rest of the world remained open, and the focus this morning is once again on risk sentiment.
The main story driving markets today comes, again, from China – overnight, service PMI data from the nation came in substantially softer than expected. A fresh sign of weakness, this adds more fuel to the narrative that China’s economic recovery is not going as expected. While still showing expansion in the economy, last night’s release well below expectations is yet another warning sign for the nation’s economy as consumers further scale back spending. Additionally, a credit crunch is developing, prompting state banks to offer long-dated loans to local governments. The overall gloomy picture is adding a bit of strength to USD and driving down currencies of nations with strong economic ties to China, primarily the Antipodeans.
Later today, the Federal Reserve is due to release the minutes from its June meeting, hopefully shedding some light on its decision to “skip” a hike in June. Markets remain somewhat unconvinced that there will, in fact, be two more hikes this calendar year, so the language used by the Fed will be key in setting the path for USD through the rest of the month.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
Holiday Donation Results – Thanks for Helping!
Earlier this year, Monex made a donation in honor of your continued trust in us for your FX needs. We’re happy to report that each charity received a percentage of an overall amount based on your votes. Thank you for participating! View Results
Monex USA introduces OPTIONS
With currency exchange rates in a constant state of flux, companies transacting cross-border face the risk of losing substantial sums of money if they fail to hedge their exposure to these shifts. Monex USA now offers a wide range of FX options that could help your business better manage risk. Learn More
CAD ⇓
Even as oil prices, a traditional driver of Canadian Dollar prices, gain this morning, the Loonie finds itself on the back foot today as investor sentiment across the globe soured. The Bank of Canada’s meeting next week is seen by markets as a crapshoot, with odds of a hike versus pause essentially at a 50-50 split. We believe the BoC is more likely to hold rates steady rather than hike this month as Canada’s inflation outlook is not nearly as dire as many nations around the world.
AUD ⇓
The Australian Dollar is posting losses this morning on gloomy news from China, and the US market’s delayed reaction to the Reserve Bank of Australia’s decision to pause interest rate hikes late Monday night. Though this move from the RBA was generally expected and largely priced in, the possibility of a hike from the Fed at the end of this month is driving the currency down as interest rates of the two nations are likely to diverge soon.
