Spreadex Market Update
Dollar Slides Amid Debt Ceiling Deal Anxieties as WTI Plunges and Commodity Currencies Feel China's Economic Headwinds
The financial markets experienced a tumultuous day of trading as the dollar weakened despite increasing prospects of a Federal Reserve rate hike. Investor anxiety grew over the timing of the debt ceiling deal reaching President Biden's desk. Concurrently, WTI crude oil prices tumbled over 5% on concerns that the Senate might delay the debt ceiling bill. Moreover, commodity currencies were affected by China's economic headwinds following a disappointing manufacturing PMI. Australia's CPI exceeded estimates, albeit with a cooling in core prices. Meanwhile, the USD/JPY fell due to yen strength after an emergency meeting was held to discuss financial markets.
Commodity Currencies Under Pressure After China PMI
China's official NBS May Manufacturing PMI fell short of expectations, marking the second consecutive contraction at 48.8, compared to the anticipated 49.5. This sign of economic headwinds in China had a negative impact on commodity currencies. The Kiwi, for instance, traded at 60 cents early Wednesday, with a potential break exposing 0.5944.
Australia CPI Hot, but Core Cools
Australia's April CPI reading surpassed expectations, reaching 6.8%, higher than the predicted 6.4% and the previous 6.3%. However, when excluding volatile elements, core CPI dipped to 6.5% from the previous 6.9%. The surge in housing and motor fuel prices were identified as the primary drivers behind the overall price increase in Australia. Consequently, the Aussie lost 0.65 early Wednesday, with the next major support level at $0.6430.
Japanese Officials Hold Emergency Meeting on Financial Markets
The USD/JPY experienced a decline due to the strengthening yen following reports of an emergency meeting involving the Bank of Japan (BOJ), Ministry of Finance (MoF), and Financial Services Agency (FSA) to discuss financial market developments. Masato Kanda, a top FX diplomat, reiterated the importance of exchange rates reflecting fundamentals but declined to comment on the 140 level for the currency. Without significant resistance, the USD/JPY could approach 138.77.
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