There were no fresh economic reports to move the major currencies around, so traders priced in risk-friendly events from last Friday and the weekend.
- No major economic report on the docket
Overall risk appetite
There’s no one headline that pushed high-yielding assets, but there were a couple of headlines from last Friday and over the weekend that encouraged a bit of risk-taking.
For starters, Fed Governor Powell’s Jackson Hole speech communicated that the Fed is on track to raise its rates (despite Trump not liking it) but that they would do so GRADUALLY.
The last bit was music to the equity market traders’ ears, as it means no sudden loss of easy money.
Next up is President Trump tweeting about a “big Trade Agreement” with Mexico over the weekend, which was supported by Mexico’s Economy Minister Ildefonso Guajardo sharing that the U.S. and Mexico are in the “final hours” of their bilateral negotiations.
No additional trade tariffs is better than more trade tariffs, so investors were pretty happy with the updates.
- Nikkei is up by 0.89% to 22,802.3
- A SX 200 is up by 0.24% to 6,273.5
Last but not the least is the People’s Bank of China (PB0C) announcing that China’s banks would go back to using the “counter-cyclical factor” in pricing in the yuan against the Greenback.
No one knows exactly how it’s different from the previous calculations, but many believe it would lead to a stronger yuan and benefit Chinese companies with large dollar holdings.
Last Friday’s decision also supported speculations that the central bank is not comfortable with further yuan depreciation and that China isn’t using a weak yuan as a weapon in the U.S.-China trade war.
- Shanghai index is up by 1.43% to 2,768.404
- Hang Seng is up by 2.06% to 28,423.1
Commodities also saw some support, with gold taking advantage of a bit of dollar weakness while crude oil extended its gains from the previous week.
Gold is up by 0.15% to $1,206.70 per troy ounce
Brent crude oil is up by 0.22% to $75.77 per barrel
U.S. WTI is up by 0.23% to $68.66 per barrel
Major Market Mover(s):
The safe-haven yen shrugged off the risk-friendly vibes and shot up across the board thanks to optimism over the Chinese yuan and the Fed’s gradual rate hikes.
USD/JPY is down by 17 pips (-0.15%) to 111.06; EUR/JPY is down by 16 pips (-0.12%) to 129.10; GBP/JPY is down by 8 pips (-0.06%) to 142.76; AUD/JPY is down by 9 pips (-0.11%) to 81.38, and CHF/JPY is down by 10 pips (-0.09%) to 112.96.
Unlike the yen, the low-yielding franc took hits on a bout of risk-taking in the Asian markets.
EUR/CHF is up by 7 pips (+0.06%) to 1.1429; GBP/CHF is up by 15 pips (+0.11%) to 1.2638; CAD/CHF is up by 8 pips (+0.11%) to .7552, and NZD/CHF is up by 7 pips (-0.10%) to .6579.
Watch Out For:
- U.K. banks out on summer holiday
- 8:00 am GMT: Germany’s IfO business climate (101.9 expected, 101.7 previous)