Risk rally continues after Friday’s pause

It started slowly

After a slow, almost shaky start to trading at the beginning of the week, investors once more embraced risk and took equity indices higher along with risk-beta currencies.

US indices rose between 0.31% and 0.46% while China shares outperformed with a jump of 0.6%, though so far have failed to recoup all of Friday’s losses. Hong Kong shares rose 0.13% following peaceful anti-extradition bill protests at the weekend.

Soft start for Asia on G20 uncertainty and Middle East Tensions

RBA’s Lowe sees economy benefiting from investment

While admitting the risks to the global economy are tilted to the downside, and the Australian economy has slowed, RBA Governor Philip Lowe implied that Australia would face more rate cuts but acknowledged that it was a legitimate question to ask how effective a global monetary easing cycle would be. He commented that the effect on exchange rates would be offset if everyone is following the same easing path.

He suggested that the Australian economy could benefit from more infrastructure spending, with lower rates elsewhere enabling the government to borrow at relatively cheap levels and boost infrastructure investment, that would benefit the local economy.

The Australian dollar climbed for a fifth consecutive day versus the US dollar, rising 0.4% to 0.6955 while it climbed 0.47% to 74.69 versus the Japanese yen. AUD/USD is nearing the 55-day moving average at 0.6991, which has capped prices since April 23.

AUD/USD Daily Chart

Source: OANDA fxTrade

Oil pushes higher on sanctions

Crude oil prices continued to climb at the start of the week as additional US sanctions against Iran are due to be imposed today. West Texas Intermediate (WTI) rose the most in 16 months last week, reaching new highs for the month of Friday before easing back. The uptrend has continued today with prices rising 0.3% to $57.55.

The convergence of the 100-day and 200-day moving averages at $58.55 and $58.73 could act as the next resistance point.

WTI Daily Chart

Source: OANDA fxTrade

German sentiment surveys on tap

It’s a relatively quiet data calendar to kick off the week, with the German IFO surveys the highlight in Europe. The expectations index is seen slipping to 94.5 in June from 95.3 last month and both the business climate and current assessment indices are expected to show a slight deterioration from May.

The US session features the Chicago Activity index for May (another negative reading for the fifth straight month seen) while the Dallas Fed business index for June is expected to rebound to +4.8 from -5.3 in May.

The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/

OANDA Senior Market Analyst Craig Erlam previews the week’s business and market news with Jazz FM Business Breakfast presenter Jonny Hart.

Source: MarketPulse

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