Greenback Remains Firm To Start Key Week

The US dollar is firm, though largely confined to the pre-weekend range.  The Australian dollar is a significant exception. The sharp downside momentum seen over the past several sessions has been further encouraged by disappointing Chinese data.  Over the weekend, the world’s second largest economy reported a rash of disappointing data, including a slowing of industrial production to six year lows.  

The Australian dollar fell more than 3 cents last week and finished on its lows.  Today it gapped lower. It opened just below $0.9020 after having recorded a low before the weekend just above $0.9030, according to Bloomberg.  The Australian dollar fell to about $0.8985, which is essentially technical retracement level.  Although the Aussie has stabilized back above $0.9000, the gap remains unfilled.  How it behave around the gap in pricing will be important in shaping the near-term technical outlook.  

China’s economic news has helped spur expectations of some stimulus response, especially in the context of last week’s soft inflation report (CPI 2.0% vs 2.3%).  Chinese shares advanced though the Hong Kong Enterprise Index of Chinese shares fell 1.6%.  The yuan, which has been steadily appreciating since the end of April (y about 2.3%), despite the dollar’s broader gains, weakened today.  It appears to be carved out a near-term bottom in the second half of last week.  

Economic news has been light, but there are a couple of political developments to note.  First, the political uncertainty stemming from the results of the Swedish election is failing to have a lasting impact on the krona.  It is weaker in the face of a firm dollar, but it is holding its own on the crosses.   Initially, the krona was sold.  The euro rose to almost SEK9.28 from below SEK9.23 before the weekend.  This was recorded in thin Asian turnover.  The euro’s gains were completely unwound by midday in London.