European shares pressured as further rate hikes seen as likely
The US dollar extended a rebound on Monday with the USD index climbing from one-month lows as worries about higher European interest rates hit risk sentiment.
European shares were down sharply with the UK’s FTSE 100 falling 0.7% while the German DAX fell 1.0%. US shares were closed for the Juneteenth holiday.
European shares have turned from recent highs as worries about further rate hikes from the European Central Bank weighed on optimism.
In the UK, with market pricing now looking for five more rate hikes from the Bank of England, including another this week, equity market sentiment has also taken a turn for the worse.
These worries have recently boosted the euro and British pound, however.
Chinese yuan leads losses in Asia
With the US dollar higher, regional currencies fell, with the Chinese yuan again leading the losses.
The USD/CNH gained 0.5% with the Chinese yuan pressured ahead of another likely rate cut from the People’s Bank of China today.
The CNY’s recent losses have seen the AUD/CNH climb to two-year highs while the SGD/CNH hit the highest level since the CNH was introduced in 2011.
In the other markets, the Aussie was mostly lower, with the AUD/USD down 0.4% as it fell from four-month highs. The NZD/USD fell 0.5% while the USD/SGD gained 0.3%.
PBOC decision in focus
The PBOC decision will likely dominate markets in early trade today.
The loan prime rate decision is due at 11.15am AEST with markets looking for a cut in the one-year rate, currently at 3.65%, and five-year rate, currently sitting at 4.30%.
Otherwise, the Reserve Bank of Australia minutes are due at 11.30am AEST, while key US housing data, including building permits and housing starts, are both due tonight.
USD stages comeback
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 19 – 23 June
All times AEST Have a question?
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
