US Dollar Rallies as China Tensions Rattle Markets

Pound (GBP) Muted in Absence of Data

The Pound (GBP) was mixed yesterday as a lack of UK economic data and hesitancy ahead of the Bank of England (BoE) decision subdued trade in Sterling.

The ongoing political instability in the UK may have put some pressure on the Pound, which did slip against its stronger rivals. The bitter leadership contest has exposed rifts in the ruling Conservative Party at a time when the country needs a stable government.

The UK’s final services PMI this morning may cause some movement, particularly if it differs from the flash result. A confirmed slowdown in service-sector activity may weigh on GBP.

Euro (EUR) Falls amid Ongoing Economic Woes

The Euro (EUR) lost ground yesterday as Eurozone recession and gas supply fears continued to batter the single currency.

In addition, the Euro suffered from its negative correlation to a stronger US Dollar (USD).

The finalised Eurozone service-sector PMI could dent the single currency today as the preliminary estimate suggested that business activity nearly stalled last month. The bloc’s retail sales could add to the headwinds as economists expect sales to have stagnated in June.

US Dollar (USD) Firms amid Widespread Risk Aversion

The safe-haven US Dollar strengthened yesterday as escalating US-China tensions weighed on the global market mood.

Signs that the US labour market is cooling off failed to deter USD bulls. Instead, investors focused on comments from Federal Reserve policymaker Mary Daly who said that the Fed still has ‘a long way to go’ in terms of raising interest rates.

Looking ahead, analysts expect the US ISM non-manufacturing PMI and factory orders report to both reveal weakening growth. Such results could dent USD.

Canadian Dollar (CAD) Bolstered as Crude Prices Climb

The oil-linked Canadian Dollar (CAD) climbed against some of its peers yesterday, despite the manufacturing PMI revealing a larger-than-forecast slowdown, amid an uptick in crude prices.

With Canadian data in short supply today, oil prices may continue to drive the ‘Loonie’.

Australian Dollar (AUD) Recovers on Positive Chinese PMI

The China-proxy Australian Dollar (AUD) initially dipped overnight but managed to recover after China’s services PMI rose to a one-year high.

New Zealand Dollar (NZD) Yo-yos amid Mixed Market Mood

The risk-sensitive New Zealand Dollar (NZD) also fell before rebounding in overnight trade. As markets gauge China’s response to the US delegation’s visit to Taiwan, risk appetite was mixed.

Samuel Birnie

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