Headlines:
- Dismal China data weigh on sentiment
- Monetary policy alone just isn't cutting it in China
- Dollar gains further as risk appetite stays subdued
- Oil suffers another beating again, down over 4% on the day
- China stages more drills around Taiwan amid US lawmakers' visit
- Germany July wholesale price index -0.4% vs +0.1% m/m prior
- Switzerland July producer and import prices -0.1% vs +0.3% m/m prior
Markets:
- JPY leads, NZD lags on the day
- European equities mixed; S&P 500 futures down 0.5%
- US 10-year yields down 2 bps to 2.829%
- Gold down 1.6% to $1,773.03
- WTI crude down 4.9% to $87.62
- Bitcoin down 0.7% to $24,082
The focus to kick start the new week is China, as the latest set of economic releases there disappointed heavily with loan demand crashing hard. That is prompting worries about a major slowdown, which will surely spill over to the global economy.
That saw the aussie and kiwi weighed lower initially in Asia before the selling intensified as the dollar and yen gained on risk aversion during European morning trade. Equities were weighed lower with US futures retreating, though the drop isn't as notable after the surging rally on Friday. The bond market remains tepid, with yields holding slightly lower as well.
EUR/USD fell from 1.0240 to 1.0190, pretty much erasing its post-CPI advance and GBP/USD is also doing the same in a drop from 1.2120 to 1.2050 during the session. USD/JPY kept steady around 133.20-40 for the most part as both the dollar and yen are holding firmer amid risk flows on the day.
Meanwhile, USD/CAD is seeing a big jump with a push from 1.2785 to 1.2915 amid the more subdued risk mood and also another beatdown in oil. WTI crude saw a 5% drop to below $88 and is holding near the lows for the day currently as oil market sentiment is not helped by the negative headlines from China.
The antipodeans are the biggest losers though, with the aussie and kiwi already softened from the poor data before an extended rally in the dollar (weaker risk sentiment) saw both currencies decline further. AUD/USD saw a drop from 0.7100 to 0.7025 while NZD/USD was hammered down from 0.6430 to 0.6360 during the session.
With little else to work with on the economic calendar and still awaiting key data before reassessing the Fed outlook, it looks like markets are clinging on to risk sentiment as the key driver to start the trading week.