Daily Analysis - 04/07/2018
The U.S. dollar was sold off heading into the 4th of July holiday. The aussie outperformed on the back of upbeat Australian retail sales and positive Chinese data. Overall market sentiment is still cautious as trade war concerns linger.
The AUDUSD rallied after data showed retail sales in Australia increased by 0.4% in the month of May, which beat the expected 0.3% increase. The pair rose to as high as 0.7424 after the data. Meanwhile, Australia’s biggest trading partner – China – released upbeat Services PMI numbers, which also helped lend support to the aussie.
After a step fall in recent days, the Chinese yuan stabilized following an intervention by the PBOC. Chinese officials attempted to reassure the markets and announced on Tuesday that Beijing would not use the yuan as a negotiation tool in the trade dispute. Both the offshore and onshore yuan have been weakening since mid-June amid escalating trade tensions with the U.S. and a downshift in Chinese economic momentum. Currently USDCNH is trading just above the key 6.6100 level.
Crude oil rose above $75 a barrel for the first time since 2014 yesterday. Concerns of supply shortages as well as API inventory data showing a bigger drawdown in stock piles than expected. Libya (a large oil producer) declared force majeure on some of its crude exports. Meanwhile, tough U.S. sanctions on Iran loom. All these factors give little confidence that there will be a balance between the ever-tightening supply and growing demand.
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