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3 Aug 2021

Forex Today: Growth, covid and Chinese techlash concerns maintain cautious mood, AUD/USD stands out

Here is what you need to know on Tuesday, August 3:

Markets are in a cautious mood after China spooks the gaming industry, Delta covid cases continue rising and the US ISM Manufacturing PMI misses estimates. The dollar is edging lower with falling yields. The Aussie stands out after a hawkish RBA decision. Etehreum's changes are causing high volatility.

Shares in Asia are under pressure after an editorial on a Chinese outlet called the gaming industry "spiritual opium," in what is seen as another step in its reining in tech companies. The risk-off mood has an impact also on European stocks.

Peak growth? The US ISM Manufacturing Purchasing Managers' Index for July disappointed with a score of 59.5, reflecting somewhat slower expansion. The Employment component rose, indicating better hiring, and the Prices Paid one cooled off its high, representing easing inflation. The indicator serves as the first hint ahead of Friday's Nonfarm Payrolls.

Nevertheless, worries that growth reached its limits sent investors to the safety of US Treasuries. Returns on the benchmark 10-year notes dropped below 1.20%, weighing on the greenback.

See Analyzing inter-market correlations to see if reflation trade is coming to an end

Coronavirus: Daily US COVID-19 cases have reached an average of 85,000 per day, the highest levels since the winter. Hospitalizations and mortalities are also on the rise. The Delta variant is spreading mostly among the unvaccinated and has caused some hesitant people to get the jab. The immunization pace is off the lows. Globally, infections are flattening, providing hope for better growth.

EUR/USD is hovering under 1.19 ahead of eurozone producer prices. GBP/USD is trading around 1.39, as UK cases continue falling from their highs. 

AUD/USD stands out by trading near 0.74, a substantial gain. The Aussie is underpinned by the Reserve Bank of Australia's decision to go ahead of with tapering its bond buys despite the recent lockdowns in Sydney and elsewhere, which risk the recovery. 

WTI Crude Oil is hovering around $71 while Gold is above $1,810, benefiting from softer US yields. 

Ethereum is experiencing high volatility, falling below $2,500 after leaping beforehand. On August 4, the second-largest cryptocurrency will be changing the way it performs transactions, and reduce supply. Ethereum Improvement Proposal (EIP) 1559 is set to boost prices according to analysts. 

More Inflation, the chip shortage and Delta are peaking, what it means for markets and the dollar

 

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