US stocks plunged by 3% overnight and oil tumbled near 2%, with markets moving to safe haven currencies as the Yuan falls below key level.
Yuan Falls to Decade Low at 7 to the Dollar Level Breached
China and US trade dispute intensifies as China allows yuan to drop below the psychologically important seven-per-dollar level for the first time in a decade in response to Trump announcing 10% tariffs on China’s remaining $300 billion of imports. Adding further tensions, China has also stopped buying US agricultural products and may impose tariffs on US farm product imports.
US Non-Manufacturing Sector Growth Slows to 3-Year Low
The closely watched ISM services PMI disappointed in July, dropping to 53.7 from 55.1 in the previous month and below expectations of 55.5. The latest reading pointed to its weakest level of expansion in the non-manufacturing sector since August 2016, as business activity and new orders grew at a softer pace.
NZ Unemployment Rate in Focus
Focus turns to this morning’s NZ unemployment release ahead of the RBNZ rate announcement tomorrow afternoon, with markets having fully priced in a rate cut which will bring the official cash rate to just 1.25%. Forecasts are for unemployment to rise to 4.3% in Q2 vs the prior 4.2%, with some expecting a jump to 4.4%. Employment growth is expected to rise 0.4% vs the previous -0.2%. Any signs of a weakening labour market will be negative NZD.
RBA Rate Announcement
Markets will then look ahead to this afternoon’s RBA’s rate decision at 4.30pm. Expectations for the RBA to hold interest rates at the record low 1%, however will be watching for cues on their future rate path with the next move likely a cut to .75% by year end.
Tomorrow morning, we see Federal Reserve Bank of St. Louis President James Bullard give a presentation on the U.S. economy and monetary policy before a National Economists Club luncheon, in Washington.
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