It has been another rollercoaster 24 hours in financial markets.
The S&P 500 closed down 3% yesterday, its biggest year-to-date one day fall and Asian equities were down sharply in early trading this morning. Markets have reacted sharply to the escalation in the trade war between the US and China, with a further 66bp of Fed rate cuts priced in by end-year. But the Chinese central bank this morning did not fix the Renminbi as weak as expected and USD/CNY has fallen back to 7.01 from as high as 7.06 yesterday. This has given risk appetite a bit of a reprieve and the S&P 500 is up 0.5% at time of writing.
The Dollar has weakened against the Euro (with EUR/USD back to 1.12) and in particular the safe-haven Japanese Yen and Swiss Franc, with much weaker than expected US ISM non-manufacturing PMI data not helping. The indicator of economic activity fell to 53.7 (its weakest since October 2016) from 55.1 in June.
The Aussie Dollar has shown little reaction to the RBA meeting earlier today, with AUD/USD stable around 0.677. As expected the RBA kept its policy rate unchanged, pointing to the recent depreciation in the Australian Dollar.
