Risk Aversion Dominates The Markets, USD Higher

Market Reviews

US dollar and Japanese yen remain the strongest major currencies, while, the Australian dollar and New Zealand dollar are taking turns to be the weakest. Canadian dollar is supported by resilience in oil price, as WTI regains 74 handle.

The euro decreased, amid increased concerns of a political crisis in Germany. The German Interior Minister Seehofer offered to resign amid continued disagreements with Chancellor Merkel’s immigration policy. Still, the two will continue talks today in hope of finding common ground. But, the single currency stabilized slightly, while the markets almost ignored the weak data of the Eurozone PMI, but the positive statistics on unemployment in the region supported the current attempt to move away from the lows.

Global shares fell, as risk aversion is back in the market. In Europe, German DAX dipped by 0.50%, FTSE fell by 0.77%. CAC is down 0.81%. Asian equities were also down. China’s SSE dropped by 2.52%, leading others lower. Nikkei also lost 2.21%.

Unemployment in the Eurozone fell in May. Eurostat said the jobless rate in the Eurozone fell to 8.4% in May (a nine-year low) and down from 8.5% a month before. Analysts were expecting, that unemployment rate will remain at 8.5% level.

Eurozone manufacturing PMI declined to a one-and-a-half-year low of 54.9 in June from 55.5 in May. German manufacturing PMI fell to 55.9 from 56.9 in May. The French manufacturing PMI came in much weaker than previously reported, dropping to 52.5 in June from 54.4 in May. UK PMI manufacturing increased by 0.1 to 54.4 in June, above expectation of 53.5.

China Caxin PMI manufacturing fell to 51.0 in June, in a line with expectations. The official China PMI manufacturing fell by 0.4 to 51.5 in June. Official PMI non-manufacturing increased by 0.1 to 55.0.

Japan PMI manufacturing was finalized at 53.0 in June, revised down from 53.1. The Bank of Japan’s quarterly Tankan survey showed notable worsening in manufacturer’s sentiments in Q2. The Larger Manufacturing Index fell to 21, down from 24 and missed expectation of 23.