Markets came roaring back to life over the last twenty-four hours, sparked by a US rally amid speculation a September rate hike may be delayed. Overnight, Chinese equities were launched 6% higher after three days which produced losses of more than 16%. The US dollar index is up almost 1% and the greenback is surging higher against a basket of currencies following three days of losses. Looking ahead, US futures point to a higher open and all eyes will be on US Q2 GDP revisions and pending home sales which headline another busy North American trading session.
The stabilization in Chinese shares provided the most notable relief in overnight trading. Taking cues from North American shares, far east shares jumped more than 600 basis points in the first 45 minutes of trading and remained elevated into Thursday’s close. The People’s Bank of China set a new USD/CNY midpoint at 6.4085, and this dollar selling sparked some euro selling as Chinese reserves were assumed to be held constant. Bank of Japan’s Kuroda made comments overnight that no further plans exist for more policy easing while noting a US rate hike would elicit confidence in the world’s biggest economy and the world’s economy as a whole, nudging USD/JPY a bit higher.
Read the rest of the article Rate hike looks less compelling