US data takes focus, People's Bank of China cuts rates, yen firms
Firstly, the JPY has seen a stronger move in anticipation that the BoJ could hike the rate next week, firming back below 153.00 against the dollar. The People’s Bank of China (PBoC) also unexpectedly cut rates by 20pbs overnight, as concerns over the struggling economy escalated further.
Both these sentiment and monetary policy changes have caused Asian stock markets to close firmly in the red, as the Nikkei ended its session over 3% softer.
The sell-off in Asian markets followed a sell-off in the US, where stocks took a beating as earnings disappointed in the tech sector. Ahead of this afternoon’s much-anticipated US data, GDP and Durable Goods, markets have seen risk off sentiment increase and thus EM currencies remain on the back foot.
The rand has, therefore, opened this morning trading back around the R18.40 mark and could possibly test the R18.50 mark in the current market conditions, with headwinds for commodity currencies also flaring up.
PBoC policy pressures commodities
A sea of red is seen on the board this morning after demand concerns further weigh down the commodity sector after enhanced concerns over the state of the Chinese economy.
Gold is trading down over 1%, with platinum and palladium also struggling to find its feet. Dr. Copper is hovering just above the $9,000 mark and back to levels last seen during March of this year.
China is the world’s largest oil importer, and uncertainty over its economic prospects is an unfavourable situation for the oil price. This morning, Brent Crude and WTI are both down 0.8%, as the market continues to digest the surprise cut by the PBoC.
About Andre Cilliers
Andre is the Currency Risk Strategist at TreasuryONE. Andre's career in treasury spans more than 30 years. He has gained his extensive currency risk experience in both the banking and corporate arena. Before joining TreasuryONE, Andre headed up the treasury department for a Tier One German international bank in South Africa.
