Caixin Services PMI, an index that captures both services &
manufacturing performance of China declined in September to 50.6. The release
of this index saw the Australian dollar plunge to 0.7751 (as at the time of
writing) this comes on the back of Australia being a major source of raw
material export to China. Lower client demand and marginal rise in input cost
dragged down the index in September. The index which showed China's Services
sector grew the weakest in 21 months in September just might be reflecting the
Chinese economy in the 4th quarter of the year. The bearish sentiment on AUD
will most likely be retained for the rest of the day as the bank holidays in
US, Canada & Japan has pared volumes.
The Euro area was awash with positivity as the German Industrial
Production and Sentix Investors Confidence indices both showed significant
growth. The German Industrial Production index turned positive, beating analyst
expectations by 1.7 to 2.6, while the Sentix Investors Confidence index which
is an opinion poll of analyst & investors on their outlook of the economy,
rose to 29.7 from 28.2 in August. This signals the German economy is moving
past the Bundestag hung election results and investors are bullish about the
performance of the Eurozone economy in the coming months. This notwithstanding
the Euro traded flat for most part of the day ranging between 1.1728 &
1.1755 as the US, Canada & Japan are on a bank holiday.
The Kiwi traded flat for most of the day, closing at 0.7063 which is
just 2 pips higher than its open price. New Zealand's final election results were
made public on Saturday and the result showed no clear winner. Majority of the
votes were divided between the two most prominent parties the National and
Labour party. At the final count, National had 56 seats while, Labour held 46.
This means both major parties would have to seek a coalition with other
political parties. The next best party, New Zealand First with 9 seats has
hinted that it would announce which party to form a coalition government with
on the 12th of October 2017. Analysts are of the opinion that New Zealand First
will settle with National Party given its conservative ideology. Investors are
uncomfortable with a Labour party win as Labour leader Jacinda Ardern has
promised to ruffle feathers with her immigration policy and monetary policy change.
US negotiations with North Korea seem a waste as Kim Jong Un has
threatened to test missiles reaching the US' west coast. This led to a free
fall of the dollar at market opened on Sunday losing gains from the release of
non-farm payroll data. The US army is getting ready for a war with North Korea.
This will put a lot of pressure on the dollar in the coming days and a rise in
safe havens like the Yen and Gold.
On the energy side of things, Saudi Arabia's oil company, Aramco
announced it would be cutting its oil supply by 569,000 barrels a day in
November despite high customer demand. This is the
deepest cut in its history. This shows the countries commitment to getting oil
prices back on a bullish run. At the announcement, Brent crude erased declines
to trade marginally higher at $55.62 per barrel.
Gold returned to the greens after the doldrums recorded the prior
week. It rose to 1,275.24 from its close price of 1,260.51 the week before, as
the news of North Korea's planned missile test in US stirred volatility. The
yellow metal since falling from the psychological 1.300 three weeks back has
been on a downward spiral, continued volatility in the market will keep Gold in
the greens.
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