The US dollar was able to benefit from risk-off flows once more, as the EU Summit resulted in an ultimatum for Greece to accept the bailout proposal or exit the euro zone. Apart from that, the selloff in the Chinese stock market has been weighing heavily on risk sentiment, supporting lower-yielding currencies like USD. Data from the US economy came in line with expectations, as the trade deficit widened slightly. For today, the release of the FOMC minutes could pose a significant event risk for dollar trades, as cautious comments could dash hopes of a September rate hike.
The euro was under heavy selling pressure following the EU Summit, as talks between the Greek government officials and its creditors broke down once more. Greece has been given a five-day deadline to agree to the bailout or to leave the euro zone, which could mean more weakness for the shared currency. There are no reports lined up from the euro zone today, leaving traders to keep focusing on updates from Greece.
The pound joined the rest of its European peers in selling off strongly against the dollar and other safe-havens, as risk aversion extended its stay in the financial markets. Data from the UK came in mixed, as manufacturing production slipped by 0.6% while industrial production showed a stronger than expected 0.4% gain. The UK government annual budget release is scheduled today.
The franc also sold off in recent trading, even though data from Switzerland was mostly unchanged from previous months. The franc followed in the euro’s footsteps, as the shared currency continued to be dragged lower by Greece. There are no reports lined up from Switzerland today.
The yen was able to take advantage of the pickup in risk aversion, even though Prime Minister Abe suggested that another round of BOJ stimulus could be added prior to another sales tax hike. Earlier today, Japan printed a stronger than expected current account balance of 1.64T JPY versus the projected 1.32T JPY surplus. No other reports are lined up from Japan, leaving risk sentiment as the main driver of price action for yen pairs.
Commodity Currencies (AUD, NZD, CAD)
The comdolls suffered more hurt from another wave of risk sentiment, especially since Chinese equities resumed their slide in today’s Asian trading session. Yesterday, the RBA decided to keep interest rates on hold but reiterated the negative impact of falling commodity prices. Canada printed a weaker than expected trade deficit of 3.3 billion CAD versus the projected 2.6 billion CAD shortfall. Canadian building permits and US crude oil inventories could push the Loonie around today.
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