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Morning Call: Softer dollar boosts commodities, stocks

#SaxoStrats
Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
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Article / 18 July 2017 at 7:00 GMT

Morning Markets: USD extends slide in Asian trading

Consulting editor / TradingFloor
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Watchlist

  • New Zealand: CPI (published)
  • UK: CPI, PPI (0830 GMT)
  • Germany: ZEW economic sentiment indicator (0900 GMT)
  • US: Housing market index (1400 GMT)

The US dollar extended its losses in Asian trading on Tuesday, with China's yuan hitting an eight-month high and the Aussie dollar jumping.

The dollar's weakness was driven partly by news that the US Senate Republicans face and increasingly steep uphill battle to pass their healthcare bill to "repeal and replace" Obamacare. EURUSD climbed through 1.15, and USDJPY threatened to break below 112 after two more Republican senators said they would oppose the healthcare reform bill.

Monday's "mini-crash" in Chinese stocks, despite upbeat China GDP data for the second quarter, continued to weigh on sentiment in Asia-Pacific equity markets on Tuesday. Stocks steadied in Shanghai, but retreated in Hong Kong, Tokyo and Seoul, with firmer local currencies undermining major Asia-Pacific stock markets. 

In Australia, worries about banks pushed the S&P/ASX200 lower. And the Australian dollar leapt to a fresh two-year high, when the Reserve Bank of Australia's minutes hinted that the central bank may be considering a rate hike.

US stocks ended virtually flat on Monday, with the S&P500 and the Dow just slightly negative and the Nasdaq just a whisker positive.

European markets await inflation data from the UK and the ZEW economic sentiment indicator from Germany.

Market signals

Asian session

  • China's 'Black Monday' mini-crash weighed on sentiment in Asia
  • The mini-crash saw nearly 500 listed companies fall by their 10% daily limit
  • Shanghai Composite lost ground again; it was down 0.42% to 3,163.05 at 0530 GMT
  • Hong Kong's Hang Seng retreated too; it was down 0.15% to 26,430.48 at 0530 GMT
  • China's better-than-expected Q2 growth data lifted commodities and the Aussie dollar
  • Japan's Nikkei fell; it was down 0.61% to 19,995.63 at 0509 GMT
  • Korea's Kospi Composite slipped into the red; it was down 0.11% to 2,422.50 at 0509 GMT
  • Australia's S&P/ASX200 fell below 5700 points after the release of the RBA minutes
  • The S&P/ASX200 was down 1.20% to 5,686.30 at 0528 GMT; banks fell heavily
  • The US is considering slapping tariffs on steel and aluminium imports from China
  • Copper edged lower on Tuesday after reaching four-month highs
  • The Obamacare replacement bill faltered; Senator McConnell called for repeal vote

Forex ahead

  • AUD hit its highest since 2015 after on a mere hint of hikes in the RBA minutes
  • The soaring Aussie dollar burst through 0.79; was worth 0.7903 at 0540 GMT
  • USD was hit by the bad news on the US healthcare bill
  • USD lost ground against the yen; it was worth just ¥112.0585 at 0541 GMT
  • New Zealand inflation was lower than expected, triggering a drop in the kiwi dollar
  • The NZ dollar was worth just 0.7348 at 0541 GMT



In opinion

1..2..3
UK consumer prices rose 2.9% in May – the sharpest rise in four years – and June is on track to match that, writes James Picerno.

Asian hangover
Asian markets were sluggish after yesterday's 'Black Monday' in China, writes the Singapore-based team at Saxo APAC Sales Trading.

Aussie high
Better-than-expected China growth data has given a lift to commodities and the Australian dollar, writes the Sydney-based team at Saxo Capital Markets (Australia).


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Rides at Ocean Park amusement park in Hong Kong. Investors in Hong Kong and China have been on a roller-coaster ride after a mini-crash on Monday. Photo: Shutterstock

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