The greenback weakened for the first time after winning for six days as China announced fresh new stimulus for its struggling economy, lifting investor sentiment. AUD/USD rises 0.4% and trades mid 0.67-0.68 and USD/JPY is 0.1% lower, remaining above 141. EUR/USD is higher 0.1% today and heading towards 1.11 while GBP/USD consolidates mid 1.28-1.29.
Optimistic investors are driving China’s markets as Beijing has finally adopted a more serious growth policy and is expected to announce more supportive policies. This statement boosted Chinese equities and the yuan, but the main question now is if these policies are going to follow through and be able to tackle issues like a sinking housing market and high youth unemployment.
Germany IFO Survey is estimated today at 9AM and is usually on of the best gauges to measure Germany’s growth. This time, business expectations is the one to watch, especially as we had a soft ZEW survey in July that renewed concerns about Germany’s growth and recovery. Supply-chain limitations and the possibility of an energy crunch are easing but the manufacturing sector still appears to be struggling. Sentiment is also being dragged by tighter credit conditions, high energy prices and weaker global demand.
Euro-area PMIs released yesterday were alarming red flags and now puts in question September’s hike by the ECB. This deterioration is now visible beyond the manufacturing sector as services also started to show a slowdown in the month of June. The headline reading (Eurozone Composite PMI) fell to 48.9 in July from the previous 49.9 in June. Manufacturing in the euro-area continues to suffer more than services, although services have started to feel the impact of the current monetary tightening in place. The manufacturing PMI dropped to 42.7, from the previous 43.4, and services PMI dropped to 51.0, from the prior 52.0.