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March 10 – OCBC strategists stated that the pullback in energy prices from their highs has given Asian currencies a breather, but shifting geopolitical tensions keep risks two-way. Oil prices retreated after Trump indicated the Middle East conflict could end “soon” and the Strait of Hormuz would remain safe. He said, “Meanwhile, during this brief disruption, the US is providing political risk insurance to any oil tankers operating in the Gulf region.” A weaker dollar has revived carry trades in emerging markets, but markets remain tense. OCBC strategists Sim Moh Siong and Christopher Wong stated that the longer the Strait of Hormuz remains closed, the more oil production will be shut down. OCBC remains neutral on the dollar until clearer signs of de-escalation emerge.The Peoples Bank of China (PBOC) announced today that it conducted 39.5 billion yuan of 7-day reverse repurchase operations, with both the bid and winning bids amounting to 39.5 billion yuan. The operating rate was 1.40%, unchanged from the previous rate.The main Shanghai silver futures contract surged 6.00% intraday, currently trading at 22,525.00 yuan/kg.Japanese Finance Minister Satsuki Katayama: Prime Minister Kaoshima and I hope that the Bank of Japan will continue to work closely with the government to steadily achieve the 2% inflation target, which is driven not by cost-push factors, but by wage growth.Japanese Finance Minister Satsuki Katayama: The specific monetary policy measures will be determined by the Bank of Japan.

The AUD/USD has dropped from its monthly high at 0.6990 due to poor Australian PMIs and a rebound in the DXY

Alina Haynes

Jul 22, 2022 14:50

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After retesting the monthly high earlier in the day, the AUD/USD continued to slide in Friday's Asian trading. It drops back down to where it started the day, at 0.6916. Recent declines in the Aussie pair may be attributable to the poor prints of Australia's flash readings of S&P Global PMIs for July. The resurgence of the US dollar in the face of pessimistic attitude also affects the pair.

 

S&P Global Manufacturing PMI for Australia dropped to 55.7 in July from 56.2 in June and the 56.4 forecast. Additionally, the S&P Global Services PMI dropped to 50.4 during the mentioned month, which was below the 55.0 consensus and the 52.6 readings seen previously. Moreover, the S&P Global Composite PMI has dropped from 52.6 in prior readings to 50.6 today.

 

Conversely, as risk aversion returns to the market, the US Dollar Index (DXY) is gaining bids and is on track to revisit its intraday high at 106.70, up 0.12% on the day. It's worth remembering that the DXY dropped the day before because it was pegged to US Treasury rates, and that the benchmark 10-year bond coupons had their worst daily loss since mid-June.

 

The yield drop might be the result of a number of factors, including the European Central Bank's (ECB) surprise rate hike of 50 basis points (bps) and the implementation of a new tool known as the Transmission Protection Instrument (TPI) to manage irrational market dynamics in the area.

 

Additionally, the Nord Stream 1 pipeline from Russia restarting its gas exports to Europe boosted market sentiment and aided AUD/USD purchasers the day before.

 

In light of this, Wall Street benchmarks ended the day stronger and the 10-year Treasury rates for the US Treasury had their greatest daily decline in five weeks. However, as of the time of publication, S&P 500 Futures are down 0.50 percent.

 

The ECB's decision to limit the market's confidence as well as long-standing worries about a recession and COVID are the sources of the most recent dip in mood.

 

Nevertheless, the risk-off attitude may affect the AUD/USD pricing going ahead. However, pessimistic predictions for the US PMIs in July give purchasers reason for optimism.


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