Talking Points:

Aussie Dollar Gains, Yen and Euro Fall as Risk Aversion Takes a Breather
German, US Economic Data in Focus as Market Selloff Seeks Fresh Fodder
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The Australian Dollar outperformed in overnight trade, rising as much as 1.7 percent on average against its top counterparts, as risk appetite stabilized in overnight trade following aggressive selling in the first 24 hours of the week. The Aussie unit belatedly joined the selloff across sentiment-geared assets as Asian shares tumbled anew at this week’s trading open.

The currency’s newfound responsiveness may reflect the impact of the rout on RBA monetary policy bets. Indeed, the priced-in outlook began to deteriorate as selling on Chinese bourses reached fever pitch, with investors now seeing at least one 25 basis point reduction in the cash rate over the coming 12 months.

The Euro and the Japanese Yen found themselves on the losing side of the equation amid the about-face in sentiment. Both currencies had enjoyed outsized gains as traders unwound carry trades funded in terms of the two low-yielders.

Looking ahead, revised second-quarter German GDP figures as well as the IFO Survey of business confidence headline the docket. Economic news-flow out of the Eurozone’s largest economy has increasingly improved relative to consensus forecasts over the past two months, opening the door for upside surprises. Such outcomes may help feed a calming of the nerves on the sentiment front, perpetuating overnight dynamics.

The respite may prove fleeting however as US data enters the spot. Augusts’ PMI and Consumer Confidence reports take top billing. Realized results on US economic releases have deteriorated compared with expectations in recent weeks. More of the same this time around may rekindle global growth fears and rekindle the fires of risk aversion anew.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

23:30

AUD

ANZ Roy Morgan Weekly Consumer Conf

113.0

–

113.2

00:00

AUD

Conference Board Leading Index (MoM) (JUN)

-0.2%

–

0.2%

02:00

CNY

Conference Board Leading Index

331.2

–

328.2

03:00

NZD

RBNZ 2yr Inflation Expectation (3Q)

1.94%

–

1.85%

European Session

GMT

CCY

EVENT

EXP

IMPACT