25th July 2019 - AUD/USD slumps to 0.6970 area, looks to close fourth straight day in red

Good Morning,

Market Headlines

- Markit’s preliminary US manufacturing PMI fell more than expected in July, to 50.0 from 50.6, its lowest level in almost a decade and spotlighting stagnant US manufacturing conditions.

- Brent crude oil reversed gains sparked by a decline in US inventories and fell 2.0% to $62.60 following the weak global PMI data. Iron ore fell 2.5% to $115.40 on expectations supply would rebound from the disruption in Brazil earlier this year.

-Eurozone July PMIs proved to be weaker than expected (EZ composite 51.5, manufacturing 46,4 versus est. of 52.2 and 47.7

- Boris Johnson was sworn in as new UK PM and suggested an array of spending to support health, social care, policing and business


- EUR ranged sideways between 1.1125 and 1.1155.

- GBP bounced from 1.2430 to 1.2522 as some uncertainty was removed with the appointment of Boris Johnson as new PM.

- USD/JPY roundtripped from 108.20 to 108.00 and back.

- Underperformer AUD extended yesterday’s losses, from 0.6990 to 0.6973

- NZD bounced slightly from 0.6692 to 0.6720.

- AUD/NZD fell from 1.0430 to 1.0396.

AUD Thoughts

AUD/USD slumps to 0.6970 area, looks to close fourth straight day in red

- Disappointing PMI data from Australia weighs on the currency.

- US Dollar Index turns flat on the day near 97.70 in the NA session.

- RBA's Assistant Governor Kent is scheduled to speak in the Asian session.

The AUD/USD pair came under bearish pressure during the Asian trading hours following uninspiring PMI data from Australia before making a modest recovery in the second half of the day. However, with the USD gathering strength in the last couple of hours, the pair struggled to move back into the positive territory and was last seen trading at 0.6975, erasing 0.42% on a daily basis.

The data published jointly by the Commonwealth Bank of Australia and the Markit Economics earlier today revealed that the business activity in Australia's both the manufacturing and the service sector expanded at a slower pace in July than they did in June to weigh on the AUD.

There won't be any macroeconomic data releases from Australia but the Reserve Bank of Australia's (RBA) Assistant Governor Kent will be delivering a speech during the Asian trading hours.

Event Risk Data Today

- Australia: RBA Governor Lowe speaks on “Inflation Targeting & Economic Welfare”, Sydney 1:05pm.

- Europe: The Jul ECB policy meeting is live. Pricing reflects a roughly 35% chance of a 10bps cut against a 65% chance of an on-hold decision. Of similar interest will be guidance (or possibly a decision) on restarting the asset purchase program. Note today’s meeting will not involve updates to macroeconomic projections which are slated for the Sep 12 meeting.

- Germany: Jul IFO business climate index is expected to edge down to 97.2 from 97.4.

- US: Jun durable goods orders and wholesale inventories data are released ahead of tomorrow’s Q2 GDP report. Core capital goods shipments – a proxy for business investment – are expected to decline 0.2% leaving the average for Q2 up 0.4% on the average for Q1.