Market Wrap
Market sentiment has taken another turn for the worse this morning after the People’s Bank of China kept both the prime 1-year and 5-year rate unchanged, despite hopes that they act.
The PBOC kept the closely watched 1-year rate at 3.85 percent, although some economists hoped they may be cutting today. After the decision, Chinese stocks fell, alongside Hong Kong and Japanese indices, while the USDCNH currency pair advanced.
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The Hang Seng has lost over 2 percent this morning, while the Nikkei is down by close to 1 percent. The failure to shore-up the slowing economy is naturally causing traders to question how strong the next month’s data will be.
Another proxy for risk-off and China, the AUDUSD, has been in freefall again this morning. It would appear that the pair is going to test the 0.7000 level, however, it remains to be seen if this support level will hold.
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Crude oil and Brent oil are starting to show signs of finding meaningful support, and so far today both have held above Thursday’s low. Precious metals are also off the floor, although copper and silver currently remain very weak.
Volatility is on the rise, with the VIX spiking higher over recent days. As we approach Jackson Hole and the data releases ahead the main even on August 27th, the market moves and indeed market volatility is likely to remain elevated.
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Another currency that is rapidly rising is the USDCAD pair. The Loonie has been hit hard due to the drop in oil prices and the notion that the FED is about to taper and catch up with the Bank of Canada.
In terms of other market moves the trade remain “king dollar” as the greenback makes new strides higher above the 93.50 level this morning. The GBPUSD pair is still reeling lower, which is providing upwards support for the EURGBP pair.
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Bitcoin has made huge strides since yesterday and is trading firmly back above its 200-day moving average once again. Ethereum has also pick-up alongside the top and looks to be targeting the $3,600 level.
The main data point to watch today during the European session is UK retail sales. Sterling could certainly do with some relief. Market participant will also look to the main data release during the US session, which is Canadian retail sales.
