– Negative risk sentiment weighing on markets.
– China’s economic woes raise contagion concerns.
– US dollar grinding out gains.
USDCAD: open: 1.3538-42, overnight range: 1.3525-1.3558, close 1.3547, WTI $80.21, Gold $1893.19
The Canadian dollar is frail due to widespread risk aversion that is fueling demand for US dollars against all major G-10 currencies.
China’s role in unsettling global markets is undeniable. The stumbling post-pandemic economic recovery led Beijing to start withholding key economic data in an effort to mask the poor performance. However, this is of limited consequence given that the official numbers were largely fictitious to begin with. China’s Evergrande a property developer, filed for Chapter 15 bankruptcy in NY, which has only aggravated the negative risk sentiment.
Steady oil prices are serving to slow Canadian dollar losses. West Texas Intermediate (WTI) bounced in a $79.94-$80.93 band overnight. Hopes for sharply higher prices due to supply constraints from production cuts are being washed away by the latest concerns that global economic growth is stalling.
The Asian equity indices ended the week on a negative note, led by a 2.05% plunge in Hong Kong’s Hang Seng index. European stock markets are under pressure, with the French CAC 40 and the German Dax leading the parade lower. S&P 500 futures are down 0.39%, despite the US 10-year yield retreating to 4.223% after closing at 4.304% yesterday.
EURUSD is at the bottom of its 1.0860 to 1.0894 range, revealing a persistently negative bias while trading below the 1.0900 threshold. Eurozone economic data was ignored as the results were as expected. Harmonized Consumer Prices (HICP) rose 5.3% y/y in July, while Core-HICP rose 5.5%.
GBPUSD experienced a bit of a roller-coaster ride, rising and falling in a 1.2699-1.2766 range. Broad-based US dollar strength and weaker-than-expected July Retail Sales (actual -3.2% y/y vs forecast -2.1% and -1.6% in June) weighed on the pound. Analysts dismissed the results as an anomaly due to weather.
USDJPY was range-bound in a 145.16-145.87 band. Prices are off their peak thanks to the overnight slide in US 10-year Treasury yields.
AUDUSD is at the bottom of its 0.6385-0.6429 range due to a litany of woes. China’s growth concerns, the dovish outlook by the Reserve Bank of Australia, and broad US dollar demand are weighing on the currency pair.
Today’s Canadian economic data includes Wholesale and Raw Materials Price indices. The US economic calendar is empty.
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