Spreadex Market Update
Better Risk Sentiment on Tuesday Following US/China Trade Tariff News
Risk sentiment is rebounding over the European open on Tuesday following news yesterday that the Biden administration might ease tariffs on around $300 billion worth of Chinese goods. The move would reverse the levies put in place during the Trump administration and would be highly beneficial for helping calm soaring inflation. Additionally, a stronger-than-expected China services PMI overnight has also added to the better risk backdrop today, leading equities higher across the board. Traders will now be looking to see whether this bullish momentum can develop further over the day.
Key Factors for Today
- USD muted as traders return following US holidays – FOMC minutes due tomorrow
- Risk sentiment boosted on news that Biden considering lifting some China trade tariffs
- AUD higher following further RBA rate hike, risk currencies generally higher, safe-havens lower
- BOE speakers due today
- Gold and silver muted on light USD flows
- Oil higher following better China news
Coming Up
- GBP & EUR UK and Eurozone PMIs
- GBP BOE’s Bailey speaks
- USD US Factory orders
USD Quiet as Traders Return
It’s been a quiet start for the US Dollar today. With US traders set to return following the July 4th holiday there yesterday we might see better flows. However, there is very little in the way of data until tomorrow’s FOMC meeting minutes. Traders will be waiting to see what the discussions were around the upcoming July hike to assess the chances of a larger 75bps hike, with hawkish signals likely to fuel fresh USD upside ahead of the NFP data on Friday.
AUD Rallies on 50bps RBA Hike
In FX, the better risk tone overnight has fed into stronger demand for risk-currencies. AUD has been boosted by the latest rate hike from the RBA overnight, with the bank hiking rates a further 50bps. Along with the hike, the bank struck a firmly hawkish tone and signalled the prospect of further tightening to come as it continues to battle inflation. Safe-haven currencies have been the weaker performers today. On the data front, we have a raft of UK and eurozone PMI data sets for traders to keep an eye on along with BOE’s Bailey and Tenreyro who both will speak today.
Gold & Silver Muted on Tuesday
Both gold and silver have been broadly flat today amidst light USD action. With US traders out yesterday and the FOMC minutes due tomorrow, there is little to suggest we will see any material moves in metals ahead of that release. Both metals are vulnerable to further downside should we see a fresh USD rally in response to those minutes tomorrow.
Oil Rallies on Better China News
Oil prices have been firmer across the European open on Tuesday. Crude futures are now around 6% off the week’s lows, boosted by the better risk tone. News of potential US/China trade-tariff reversals has been welcomed by oil traders, as has the better services PMI seen in China overnight. Recessionary fears in China earlier in the year were a major downside factor for oil prices so oil Is now deriving support from better China-linked news.
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