Investors weary of China’s policies and rising Covid cases are selling equities and the dollar
The dollar is weaker as international investors see little upside for US Treasuries or equities. China’s decision to turn some education industries into non-profits has led to a sell-off in Chinese equities of 8% over 3 days. Equity markets around the world are down in sympathy as investors speculate other industries may face constraints in China. Covid case acceleration continues to sap investor optimism despite strong earnings from some key US companies and industries.
“You will either step forward into growth or you will step back into safety.”
July 27, 2021
EUR/USD 1.1813 GBP/USD 1.3809 USD/CAD 1.2582 AUD/USD 0.7362 USD/JPY 109.8500 USD/CNH 6.5139 USD/ILS 3.2536 USD/MXN 19.9951 USD/CHF 0.9146 USD/INR 74.4650 USD/BRL 5.1785 USD/SGD 1.3601 USD/DKK 6.2959 USD/SEK 8.6142 USD/NOK 8.8743
The dollar is weaker for a second day despite financial market stress. US investors move to Treasuries causing yields to fall. FX investors avoid the dollar as Treasuries look very expensive as the real rate of interest becomes more negative. Durable Goods Orders for June were weaker than expected even after stripping out the more volatile aircraft orders. Prior month was revised up but overall, the data shows a worse month than expected.GBP
The pound is flat despite a sixth consecutive day of decreasing Covid cases.EUR
The euro gains vs. the US dollar on overall dollar weakness. Spain announced they will hire an additional 30,000 public employees signaling continued spending by the government.CAD
The Canadian dollar is showing overnight loses despite overall USD weakness. Covid-19’s fast-spreading delta variant is reducing demand and undermining the outlook for crude inventories to decline.ASIA/PACIFIC
The Japanese yen added to gains following weak US Durable Goods data. US 10-year Treasury yields dipped sapping demand from international investors.
Beijing’s steep regulatory overhaul saps market sentiment. Investors have run into trouble with Beijing authorities who are attempting to rein in private companies they believe are challenging the government’s authority, intensifying inequality and increasing financial risk. The Chinese yuan has dipped 0.6%.
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