Analysts at Westpac explained, in a market wrap, that Asia’s upbeat equity mood extended to Europe and the US, with help from corporate earnings.
Key Quotes:
“There was little data of note. AUD/USD rallied as far as 0.7440 with help from reports China’s central bank had little tolerance for further yuan decline.”
“Today’s calendar includes Australian June housing finance approvals, a speech by RBA governor Lowe and China July trade data.”
“Sentiment was upbeat, boosting the S&P 500 to a six-month high, and pushing bond yields higher and the US dollar lower.”
“A steep rebound in Chinese equities (2.7% on the Shanghai Composite) and measures to stem yuan weakness were some of the factors at play.”
“Various newswire sources claimed that the PBOC would fight to prevent USD/CNY breaking through 7.00. The pair started to roll over from 6.86 in the Sydney afternoon, closing around 6.83, while the offshore yuan extended its rally in London and NY trade, from about 6.87 to 6.82.”
“This looked to be the catalyst to inspire AUD/USD, which had traded quietly through the RBA statement. The Aussie followed the yuan with a bounce from 0.7395 to as high as 0.7440 in London/NY, before drifting back to 0.7420. There was little response as the US confirmed that tariffs would be imposed on $16bn of Chinese goods imports from 23 August. This completes the $50bn announced in June.”
“NZD/USD also gained on the CNY bounce to 0.6755 before completely retracing in NY. This meant AUD/NZD broke higher, from 1.0990 to 1.1035 – the highest since January. The RBNZ statement is due 7am Sydney time Thursday. “
“EUR/USD rose from 1.1555 to 1.1608 (also kicking off in line with CNY) before consolidating. GBP/USD was choppy but flat overall. USD/JPY initially fell from 111.35 to 111.00 before rebounding to 111.40.”
“US JOLTS job openings rose from an upwardly revised 6.659mn to 6.662mn in June. The hiring rate slipped from 3.9% to 3.8%, while the quit rate was steady at 2.3%, overall continuing to reflect a tight jobs market. The GDT dairy auction saw prices overall unchanged, with whole milk powder up 0.1% (against future earlier pricing a 1% rise).”
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