A slight risk-off bias
It was a slow start to the week with risk appetite taking a slight downturn across the board. Equity markets edged lower after Friday’s gains, with the US indices sliding between 0.06% and 0.12%. The HongKong33 under-performed following more anti-government demonstrations over the weekend, which had a knock-on effect for China shares.
Currency markets also displayed a risk-off bias, with the Australian dollar sliding 0.04% versus the US dollar and 0.14% against the Japanese yen. The yen was broadly better bid on safe haven buying, rising 0.15% versus the greenback and 0.12% versus the Euro.
AUD/JPY has fallen to the lowest level in 4-1/2 weeks and is nearing the 61.8% Fibonacci retracement level of the June-July rally at 74.829.
AUD/JPY Daily Chart
Trade talks resume this week
US representatives are on their way to Shanghai for two-day face-to-face trade meetings almost three months after negotiations disintegrated into acrimonious disarray. There hasn’t been much fanfare from either side ahead of the talks, and China’s state media noted this morning that it does not expect any major breakthrough with the US this week, and reiterated an earlier opinion that China could wait until the US elections in 2020 are over before coming to an agreement.
USD/CNH has been confined to a broad 6.85-6.90 range since the second half of June and is currently at 6.8890, hovering below the 55-day moving average at 6.9018, which has capped prices on a closing basis since July 9.
USD/CNH Daily Chart
China to hold briefing on Hong Kong
China’s Hong Kong and Macau Affairs Office, which reports to Beijing, has scheduled a news conference today in the capital. The South China Morning Post noted that this would be the first such event since the British handed over rule of Hong Kong in 1997, and comes amid escalating unrest and demonstrations in the former colony.
The HongKong33 index has fallen for a third consecutive session, dropping 1.13% today to as low as 27,993, the weakest since June 19, and is testing the 55-day moving average support at 27,983.
HongKong33 Daily Chart
UK housing stats on tap
There’s not much to excite on the data front today, with UK housing data for June the main attraction. House prices as measured by the Nationwide index are due, and rose 0.5% m/m in May. Mortgage approvals are expected to increase to 65,990 for the month from 65,409 for May.
For the US session, the Dallas Fed manufacturing business index for July is the only item on tap and it’s expected to improve to -5.1 from -12.1 in June. However, that would be the third consecutive month it has been in negative territory.