Overnight setting of the renminbi's value calmed financial markets
Peter Compton " | August 6, 2019
The dollar is stable as markets await the next tweet. Safe-haven Japanese yen and Swiss franc gave back some of their recent gains. The Australian dollar collapsed to its weakest level in 10 years yesterday as the Reserve Bank of Australia holds rates at 1% and signals low rates are here to stay. Hopes of avoiding a hard Brexit buoyed the pound.
August 6, 2019
EUR/USD 1.1179 GBP/USD 1.2167 USD/CAD 1.3233 AUD/USD 0.6787 USD/JPY 106.52 USD/CNH 7.0508 USD/ILS 3.4882 USD/MXN 19.5999 USD/CHF 0.9774 USD/INR 70.8250
Non-manufacturing PMI numbers came-in below expectations yesterday. However, the main focus for investors was escalating US-China tensions, as the US accused China of currency manipulation after the renminbi breached Rmb7 to the dollar.
Labeling China as a currency manipulator provides President Trump cover to direct the US Treasury to buy renminbi and sell dollars to weaken the greenback. This has rarely occurred but is supported by Director of Trade and Manufacturing Policy, Peter Navarro and Trump.GBP
EU officials believe there is “no basis” for further withdrawal agreement negotiations as UK demands. The opposition Labor Party says they will call for a no-confidence vote in parliament when the group reconvenes after summer break. The financial markets see this as a possible way to prevent Boris Johnson from taking Britain out of the EU without a deal.
Positive news came out on the data front, as UK Composite PMI and Services PMI came-in higher than expected.EUR
The euro gave back some of yesterday’s gains after the Chinese fixed the yuan at stronger levels and hopes of a Brexit deal surfaced. German factory orders for June surprised to the upside at +2.5% erasing much of the loss from the prior month. Economists still believe Germany may be headed for a recession.CAD
The Canadian dollar is weaker today as the price of oil remains under pressure. The C-dollar broke a long-term weakening trend in June but has been unable to gain strength since.ASIA/PACIFIC
The People’s Bank of China set the daily currency fixing stronger than expected, helping the tumbling renminbi stabilize.
Strong positive economic data helped the New Zealand dollar continue its recent rally.
Possible economic weakness in China, due to the trade war, drove the Australian dollar to its weakest level in 10 years relative to the US dollar.