Good morning,
Yesterday, the market digested the back and forth between China and the US in the developing trade war, with remarks from the West on the yuan movement making headlines. Trump’s response is eagerly awaited, with the rest of the markets on the sidelines bracing for the collateral damage likely to drip down.
The USD gave up some of its recent strength yesterday, with the US bond market acting as a life raft for the worried investors, pushing down yields, and hence the dollar. This, combined with the disappointing PMI data, saw the implications of a knock to the services side of the US economy and further encouraged the market to price in more extensive rate cuts from the Fed.
Around the G10, the NZD rallied on strong unemployment data for Q2. The Reserve Bank of Australia maintained its interest rate at 1% and the JPY claimed back some haven currency demand, with concerns around the trade war and growing pricing in of a dovish US monetary policy.
There is no real significant data today, so the market is likely to simmer in yesterday’s action in preparation for the UK to take the stage on Friday with GDP figures and industry numbers due.
Have a great day.