Today’s Financial Market Headlines
- The US Dollar Index (DXY) hit its highest level since May, as investors continued to bet on the US economy
- Equities traded subdued, as markets digested disappointing economic data from China
- Commodities were broadly lower, as the stronger US Dollar weighed on prices
The DXY continued to rise, breaking above the 104.50 level. The US Dollar is being supported by the strength of the US economy, which is outperforming its peers. The Federal Reserve is also expected to continue raising interest rates, which will make the US Dollar more attractive to investors.
Equities were lower, as investors digested disappointing economic data from China. The Caixin Manufacturing Purchasing Managers’ Index (PMI) fell to 49.2 in August, its lowest level since February 2020.
This suggests that the Chinese economy is slowing down.
Commodities were also lower, as the stronger US Dollar weighed on prices. Copper, WTI crude oil, and gold all fell on the day. The stronger US Dollar makes it more expensive for foreign buyers to purchase commodities.
The RBA held interest rates steady at 4.1%, as expected. The bank also left the door open to additional hikes if needed. However, the negative growth talk did pressure the AUD alongside weak Chinese data.
The AUD was the weakest of the majors, as the risk-off sentiment persisted. The Australian dollar is sensitive to Chinese economic data, and the weak PMI reading weighed on the currency.
Looking ahead, the main event for this week will be the US ISM Services PMI, which is released tomorrow afternoon. We also have some Australian GDP data coming up on Thursday morning, which could offer some possible short-term mean reversion opportunities in the AUD.
Overall, the financial markets are in a risk-off mood, as investors are concerned about the global economic outlook. The stronger US Dollar is likely to continue to weigh on commodities and other risk assets.
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