Following Monday’s drop, Asian stocks rebounded, with the Shanghai index climbing 0.88%. However, a cautious mood remains in the aftermath of the People’s Bank of China’s smaller-than-expected interest rate drop. The Dow Jones down 0.51%, the S&P 500 declined 0.28%, and the Nasdaq gained 0.06% on Wall Street. The cautious attitude remains dominant.
Concerns about China, along with S&P downgrades of U.S. banks and predictions of continued high interest rates, are putting negative pressure on market sentiment. The next Jackson Hole annual symposium, which begins on Thursday, is crucial, with Fed Chair Powell’s address on Friday. Prior to the symposium, US rates climbed to multi-year highs, with the 10-year yield exceeding 4.30%.
According to data released on Tuesday, US Existing Home Sales fell 2.2% in July to an annual pace of 4.07 million, falling short of the market estimate of 4.15 million. The Richmond Fed Manufacturing Index rose from -9 to -7 in August, in line with market expectations. In the US, New Home Sales are coming on Wednesday. The S&P Global PMI will also be reported, with the Composite Index likely to stay at 52. Ahead of the Jackson Hole Symposium, the major attention remains on central bankers.
EUR/USD first surged to 1.0930 before dipping to test the support region around 1.0830. The pair is still under pressure and is approaching the 200-day SMA (1.0799). The Eurozone PMI is coming on Wednesday. The Composite PMI is expected to fall from 48.6 to 48.5 points. Weaker-than-expected data might put pressure on the Euro. Later in the day, Eurostat will announce the preliminary August reading of Consumer Confidence.
The UK government borrowed £4.3 billion in July, which was £3.4 billion higher than in July 2022. The budget deficit was £56.6 billion from April to July, £11.3 billion less than the Office for Budget Responsibility predicted in March. This gives the government some justification to contemplate tax cuts. The GBP/USD pair climbed above the 20-day Simple Moving Average (SMA), but then fell below 1.2750. In the immediate term, the pair is consolidating with a bullish bias. The S&P Global/CIPS Composite PMI in the United Kingdom is predicted to fall from 50.8 to 50.3, with contractions in both Services (51.5 to 50.8) and Manufacturing (45.3 to 45).
The USD/JPY stays stable at 146.00 and above the important short-term support level of 145.00, aided by increasing US Treasury yields. USD/CAD remains positive, trading at monthly highs over 1.3550. Canada will announce June Retail Sales on Wednesday, which are projected to be unchanged from May. On Tuesday, the AUD/USD traded at 0.6420, much below the day’s highs. The pair climbed for the third day in a row, but the impetus dissipated. The Australian S&P Global Manufacturing PMI is projected to remain constant at 49.6, while the Services PMI is likely to remain unchanged at 47.9. The NZD/USD pair recovered after finding support at 0.5900. It reached a high of 0.5970 before falling down to 0.5940. Retail sales in New Zealand are predicted to fall 2.6% in the second quarter.
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