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The risk-off trades crept into Asia this Thursday, fuelled by the Yuan sell-off and the Fed minutes, which tempered rate cut expectations. The Asian equities traded mostly lower alongside the US equity futures and Treasury yields. However, gold prices failed to benefit from the risk-off flows, as the US dollar held onto the overnight gains against its main competitors. Meanwhile, the upside in both crude benchmarks was capped by a limited demand for the risk assets.

Across the fx space, the onshore Chinese Yuan hit over 11-year lows against the US dollar, driving USD/CNY above 7.0750. As, a result, the Antipodeans were the weaklings, with the NZD/USD pair having suffered the most. The Kiwi fell to the lowest levels since January 2016 near 0.6370 region while the Aussie was in multi-day lows just ahead of the 0.6750 level.  

The anti-risk Yen cheered the risk-averse mood, with USD/JPY down -0.20% below 106.50 region. In turn, the AUD/JPY cross, the fear gauge, emerged a big loser in Asia. The Canadian dollar also lost ground and fell below the 1.33 handle vs. its American counterpart.    

Among the European currencies, both the EUR/USD pair and Cable traded almost unchanged, although the bias leaned towards the downside ahead of the key event risks.

Main Topics in Asia

German Finance Ministry: Early indicators point to sustained slowdown in industrial sector

US Sec. of State Pompeo: We heartily welcome Australia’s announcement”¦

US Defence Secretary Esper: China continues stealing US technology secrets – Fox News

North Korea: US cruise missile test, military moves ‘dangerous,’ still committed to dialogue – KCNA

Senate Banking, Trade and Commerce committee requires special meeting with BOC’s Poloz  to discuss trade uncertainties

Japan’s Motegi: Trade talks with the US might reach an early achievement

Gold technical analysis: Trapped in a symmetrical triangle

PBOC sets Yuan reference rate at 7.0490

WTI technical analysis: Upside is being capped by falling channel resistance

Australian yield curve flattest since October 2010

China is not manipulating the Yuan – SCMP

S. Korea central bank (BOK): Japan’s export curbs could be more damaging to local economy than tariff hikes

Asian shares tentative after Fed minutes, Hang Seng charts death cross

China ForeignMin Spokesman Geng: China to impose sanctions on US companies for arms sales to Taiwan

China’s onshore Yuan hits lowest since March 2008

Traders: Major Chinese state banks seen supporting the Yuan – Reuters

Key Focus Ahead

It’s the all-important PMI Thursday today, with the main focus on the German and Eurozone Purchasing Managers’ Index (PMI) manufacturing and services  readings for August, which will set the tone for the EUR markets in the coming days. Markets already dread the looming German recession fears and a drop in the PMI numbers is likely to further fuel the concerns and calls for fresh stimulus to combat dwindling economic growth.

Also, the European Central Bank (ECB) Monetary Policy Meeting Accounts, due at 1130 GMT, will be closely eyed for fresh hints on the ECB’s stimulus plans. Ahead of the ECB event, the UK CBI Distributive Realized Sales will be reported at 1000 GMT, but the data is unlikely to have any impact on the pound ahead of the meeting between the UK PM Johnson and French President Macron on the Brexit problem.

In the NA session, the US Jobless Claims, Markit Manufacturing and Services PMI data, Canadian Wholesale Sales and Eurozone Consumer Confidence will grab some attention for fresh trading impetus amid looming US-China trade risks. Further, the comments from the US President Trump will be closely eyed ahead of the 3-day Fed’s Jackson Hole Symposium, starting later today.

EUR/USD: Bulls struggle to keep the pair above 1.11 ahead of German PMI

EUR/USD  is on the defensive ahead of the release of all the all-important flash German and Eurozone  Purchasing Managers’ Index (PMI)  readings for the month of August. A flag breakdown on the 4-hour chart could be seen if Germany’s PMI prints below estimates.

GBP/USD: Resilient ahead of Johnson-Macron meet

GBP/USD remains modestly flat after reversing from 21-DMA. Upbeat Brexit signals from Germany, the latest negative headlines from France highlights Johnson-Macron meet.

German PMI Preview: From bad to worse? EUR/USD is ready for another fall

Prospects for Germany’s economy have likely remained grim in August. The ECB is watching the survey data ahead of its next decision. FXStreet’s Surprise Index is pointing to a disappointing outcome that may weigh on EUR/USD.