The Asian markets, with Tokyo absent and Hong Kong halted due to a typhoon warning, are experiencing subdued trading. The second-quarter GDP growth rate in China has slowed to 0.8% compared to the previous quarter’s 2.2%, and the year-on-year growth rate has increased to 6.3% from the previous 4.5%, but it fell short of the market expectation of 7.1%. Overall, the results indicate a significant slowdown in the economy.
In the foreign exchange market, the Australian dollar is slightly lower, reacting sensitively to developments in the Chinese economy. However, other major currencies are trading in a range around the levels seen after the US dollar rebound at the end of last week. USD/JPY is trading in a narrow range between 138.37 and 138.88, while EUR/USD is ranging between 1.1215 and 1.1240.
Economic indicators to be released in the upcoming overseas markets include the New York Fed Manufacturing Index (July), Canada’s International Securities Transactions (May), and Canada’s Wholesale Sales (May). The New York Fed Index is expected to decline from the previous 6.6, with market expectations ranging from -10.0 to +5.0. The median forecast is -3.5, indicating a relatively significant expected decline.
In terms of speaking events, following Christine Lagarde’s speech, several ECB officials are scheduled to participate in a panel discussion. Participants include Philip Lane, Chief Economist of the ECB, Boštjan Vasle, Governor of the Bank of Slovenia, Luis de Guindos, Vice President of the ECB, and Boris Vujčić, Governor of the Croatian National Bank.
Last week, there was finally a correction in the continuous decline of the US dollar. During the Asian session at the beginning of the week, market participants are adopting a wait-and-see approach. If there is a succession of hawkish comments from ECB officials, it may once again raise awareness of the divergence in monetary policies between the US and Europe, potentially exerting selling pressure on the US dollar. Additionally, if the New York Fed Index is close to the median forecast, the decline from the previous release could lead to further selling of the US dollar. However, considering that the US dollar index has rapidly declined for six consecutive trading days, there may still be some room for adjustment. It will be important to gauge the market’s reaction to economic indicators and statements and assess the extent of short-term accumulated US dollar selling positions.
Given the excessive continuation of dollar selling, it is anticipated that there will be a certain level of correction today.
