Key Takeaways
- 💸 Commodity currencies like AUD, NZD, and CAD are sliding to multi-week lows.
- 🔻 Yen is surging to its highest in two months against commodity currencies.
- 📉 Falling prices for industrial metals are impacting currency movements.
- 📉 Markets are pricing in an 84% chance of a 25 basis point rate cut in Canada.
- 📈 Euro is struggling after soft business activity data.
- 💰 Markets are punishing the least liquid currencies in G10 like Norwegian and Swedish crowns.
- 🏦 Speculators are closing profitable "carry" trades funded in yen.
- 💵 Yen is the best performing G10 currency against the dollar in July so far.
- 📊 Markets are waiting on U.S. GDP and core PCE data for rate cut expectations test.
- 💹 Yen’s rally is accelerating driven by strong PMI services data, boosting BoJ rate hike hopes.
- 📉 Dollar and Swiss Franc are strong, while Australian, New Zealand, and Canadian Dollars are weak.
- 📊 Technical analysis indicates potential support and bounce for NZD/JPY.
- ⏰ Nikkei, Hong Kong HSI, and China Shanghai SSE are down in Asia, DOW, S&P 500, NASDAQ fell overnight.
- 📈 Australia’s PMI Manufacturing improved marginally, PMI Services and Composite decreased.
- 💰 Inflation pressures persist in Australia, input costs rose in services sector.
- 🇯🇵 Japan’s PMI Manufacturing declined, while PMI Services rose sharply, indicating strong expansion.
- 📈 USD/CAD is surging, driven by broad commodity selloff.
- 🔍 USD/JPY’s fall has resumed, 155.36 breached, downside risk remains.
- 📰 European session will see Germany Gfk consumer sentiment, Eurozone PMIs, and UK PMIs.
- 🛒 US will release goods trade balance, PMIs, and new home sales later in the day.
- 💰 EUR/JPY is declining due to bets on a BoJ rate hike, supported by fresh buying of JPY.
- 📉 Global risk sentiment deterioration is boosting the JPY and pressuring the EUR/JPY cross.
- 🏛️ The BoJ is expected to take steps to normalize monetary policy, contrasting with ECB’s dovish outlook.
- 🔍 The EUR/JPY cross is poised for further downside below 168.00 towards the 100-day SMA support.
- 🌍 Market focus is on flash Eurozone PMIs for short-term trading opportunities.
- ⚙️ British business activity picked up in July, with manufacturing growth at its fastest in two years.
- 📈 Inflation pressures in the UK fell to their lowest levels in over three years.
- 💼 Only Germany in the Group of Seven rich economies has performed worse economically than the UK post-COVID-19 pandemic.
- 🔴 The S&P Global Flash Composite Purchasing Managers’ Index increased to 52.7 in July.
- 📊 Companies showed optimism about the future, with growth in export orders and new contracts following the general election.
- 💰 Businesses raised prices by the least since February 2021, with small increases in costs reported.
- 📉 Investors are scaling back bets on a potential interest rate cut by the Bank of England.
The Impact of Key Economic Factors on Currency Markets
The currency markets have been witnessing significant movements and developments driven by various economic factors. Commodity currencies like the Australian Dollar (AUD), New Zealand Dollar (NZD), and Canadian Dollar (CAD) are facing downward pressure, sliding to multi-week lows. This trend is further exacerbated by falling prices for industrial metals, impacting currency movements and leading to the surging of the Japanese Yen to its highest level in two months against commodity currencies.
Market sentiment is being influenced by expectations of a 25 basis point rate cut in Canada, with speculators closing profitable trades funded in yen. The euro is also facing challenges following soft business activity data, while the least liquid currencies in G10, such as the Norwegian and Swedish crowns, are being punished by investors.
Overall, the strong performance of the yen against the dollar in July, driven by positive PMI services data, is boosting hopes for a rate hike by the Bank of Japan. On the other hand, the dollar and Swiss Franc remain strong, while the Australian, New Zealand, and Canadian Dollars are weakening.
In addition to these factors, global risk sentiment deterioration and market focus on flash Eurozone PMIs are shaping short-term trading opportunities. The economic performance of key players like Japan, Australia, and the UK is also impacting currency movements, with inflation pressures and business activity data playing a crucial role in shaping market dynamics.