China worries weigh on global markets
Global markets continued to fall overnight as worries about the worsening outlook for China hit sentiment.
This week’s lower than expected Chinese industrial production and retail sales numbers saw key regional FX markets like the Chinese yuan and Australian dollar heavily sold. A decision from China’s National Bureau of Statistics to suspend the publication of youth unemployment figures, after they last reached 21.3% in June, also spooked markets.
In another example of how quickly sentiment towards China has turned, Bloomberg reports that JP Morgan sharply cut China growth forecasts from 6.4% back in May to a downwardly revised 4.8% this week.
These recent China worries have pressured key equity markets with the US’s S&P 500 down 0.8% overnight and now down 4.4% from recent highs.
Yuan, Aussie tumble to new lows
The biggest moves were seen as the Australian dollar and Chinese yuan continued to tumble.
The AUD/USD fell 0.5% overnight and struck new nine-month lows. The pair is now down 7.0% in just five weeks.
The Aussie fell in most other markets, but held steady versus the Japanese yen.
The Chinese yuan fell 0.2% versus the US dollar with the key offshore USD/CNH extending its recent move above 7.30 and hitting the highest level since November last year. The USD/CNY was also higher.
Aussie jobs in focus
In other markets, the more negative mood saw the US dollar favoured, with the EUR/USD down 0.3% and GBP/USD down 0.7%.
The New Zealand dollar managed to remain relatively well supported, however, after the Reserve Bank of New Zealand indicated local rates will likely need to remain elevated for the foreseeable future.
The NZD/USD outperformed with only a 0.2% loss.
The RBNZ even slightly increased their terminal rate projections – from 5.50% to 5.59% – but said this should not be interpreted as a sign of further hikes.
The Reserve Bank of Australia’s next move will also be in focus today with Australia’s July employment numbers due at 11.30am AEST. The market is looking for 15k new jobs with unemployment expected to climb from 3.5% to 3.6% as jobs growth moderates.
Aussie, CNY extend losses
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 14 – 18 August
All times AEST
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