Spreadex Market Update
Markets React to China PBOC's Rate Cut Hints and Dollar Weakness
Global markets exhibited robust gains driven by China's PBOC signalling a potential rate cut and the weakening dollar. Falling US job openings and fluctuating global currencies also contributed to the market dynamics.
Key Factors for Today
- China's PBOC hints at a rate cut, driving market optimism.
- US job openings hit a 28-month low, fuelling concerns about labour market health.
- German consumer confidence falters, leading to a stronger euro against a weakening dollar.
- New Zealand Dollar surges despite RBNZ selling, with an eye on the 60-cent barrier.
- BOJ reaffirms commitment to easing, impacting the yen's trajectory.
Market Movers
- Equities globally gain momentum on PBOC rate cut anticipation.
- Weaker dollar prompts gold and FX surge.
- Euro strengthens against the dollar, reflecting German consumer confidence slip.
- RBNZ's currency sale fails to deter the Kiwi's climb.
- BOJ's easing commitment affects yen's trajectory.
Economic Calendar
- SP Inflation
- BOE Consumer Credit
- UK Mortgage Approvals, Lending
- EA Economic Sentiment
- GE Inflation
- ADP Employment Change
- US GDP Growth
- Pending Home Sales
The Big News
China's PBOC Sparks Global Rally with Rate Cut Speculation
Global markets rallied in response to China's PBOC's potential plans to cut its interest rates. This development set a positive tone for equity markets worldwide. Simultaneously, in the US, the Bureau of Labor Statistics reported a significant drop in job openings, marking a 28-month low. This trend added to concerns about the robustness of the labour market recovery and potentially signalled a peak in the Fed's policy tightening cycle.
German Consumer Confidence Dips, but Chancellor's Plan Lifts Spirits
German consumer confidence took a hit, evident from the slip in GfK Consumer Confidence index. However, Germany's Chancellor Olaf Scholz's announcement of a 10-point plan aimed at bolstering the economy, including tax cuts, injected some optimism into the European market. This news led to the strengthening of the euro against the weakening dollar.
Resilient Kiwi Soars Against Odds, Defying RBNZ Currency Sales
Surprising many, the New Zealand Dollar surged despite the Reserve Bank of New Zealand's currency sales. The bank had disclosed that it sold NZD3.96 billion in July to bolster foreign exchange reserves. However, this move did not dampen the Kiwi's upward trajectory, as it gained more than 1% against the greenback, edging closer to the elusive 60-cent barrier. The bullish sentiment was further fuelled by concerns about an overheated housing market, leading to potentially increased RBNZ intervention.
BOJ Stands Firm on Easing Amid Economic Uncertainty in Japan
In Japan, the Bank of Japan reiterated its dedication to monetary easing. Naoki Tamura, a board member, highlighted the potential slowdown in inflation and the overshooting of economic growth expectations. Despite this, the BOJ's commitment to easing persisted due to the high levels of uncertainty surrounding Japan's economic outlook. The yen initially touched a fresh high before reversing, largely due to the dollar's weakness.
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