Markets Rebound Post-Yuan Dump
Rowan Crosby • 1 min read
Two days after the Chinese dramatically devalued the Yuan and markets crashed, there appears to be some light at the end of the tunnel.
The SPX bounced overnight after China efforts to stabilise the Yuan. The USD is still weak and tried to bounce but closed around the 97.50 mark – well off the recent highs of nearly 100.
Trump is clearly unimpressed with China at the moment and is effectively labelling them a currency manipulator. Which they clearly are by pegging the Yuan to the USD at the rate they deem fit. But is this any different the Yen, which is manipulated in other ways?
Either way, we have to assume that Trump will now look to follow through with his next round of tariffs on China and that will likely cause real worries at the negotiation table.
GOLD will continue to be the one asset class to watch at the moment. After breaking above key resistance at $1450, there has been no slowing down here as the risk-off game is in full swing in the mind of the gold bugs.
Asian Market Outlook
Today all the attention is on the NZD/USD as the RBNZ delivers their decision on the OCR. The majority is now looking for a rate cut of 25bp that will take the cash rate to 1.25% down from 1.5%.
This, of course, follows the lead of the RBA who has twice cut the cash rate from 1.5% to a record low 1.0% and in the process sunk the AUD/USD.
For me, this cut today is all but priced in so there is upside risk, but we will be waiting to hear the guidance around the decision which will give us an indication of where the Kiwi might go next.