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Markets stay quiet before the storm of data

Published July 31, 2018

Author: Dennis Li

Overnight we saw little change with the AUD remaining around 0.74 against the greenback as investors await the release of Chinese economic data towards lunchtime today. The Chinese PMI release poses the risk of a selloff of the AUD should it disappoint on the soft side.

With the US President repeated threats to Congress to shut down the government over the border and immigration measures, the US dollar index which measures the USD was down 0.38 percent at 94.316.

The Canadian dollar strengthened to a nearly seven-week high against the USD in the last 24 hrs, boosted by higher oil prices and optimism that progress could be made in talks to revamp the NAFTA trade pact. Negotiations to update the NAFTA had stalled since June when the US imposed tariffs on Mexican and Canadian steel and aluminum.

The Japanese yen edged up slightly against the USD testing the 111.00 level again as investors braced for the possibility that the Bank of Japan will announce changes to its monetary easing policy this morning at the conclusion of a two-day meeting. The AUDJPY remained little change this morning at just above 82.20.

With key elements in the Brexit deals opposed by the UE, Britain has warned the EU negotiators that the EU financial firms will face obstacles to working in the country after Brexit unless the City of London is allowed to operate in the bloc. The sterling remained steady above 1.30 level against the USD with AUDGBP remained unchanged overnight as well around 0.6315.

With the increasingly bitter trade war against the US, China offered Britain talks on a post-Brexit free trade deal on Monday even as a senior Chinese diplomat reiterated its door remained open for dialogue with Washington. The Chinese Yuan is still at its one-year low at 6.81 with AUDCNY steadied above 5.450.

Oil rose overnight with the US crude futures jumping more than 2% as traders continued to focus on supply disruptions and a possible hit to the output from US sanctions on Iran.

Besides the BoJ, other central bank news is likely to be on investors’ radar this week as the Federal Reserve concludes its meeting on Wednesday and the Bank of England is expected to raise interest rates on Thursday.