Summary:

• US dollar halts somewhat its recent surge
• European stock indices remain calm after strong gains on Wall Street and in Asia
• Dovish RBA puts some pressure on AUD

The start of the trading session in Europe was pretty benign as German markets are closed due to Unification Day as well as Mainland China which celebrates the Golden Week. Hence, the US dollar lost some of its recent bullish momentum awaiting the further data. Moreover, the majority of European stocks was in the green, however, the Spanish IBEX35 (SPA35) deepened its declines from the beginning of this week.

 The UK’s economy seems to be entering on track to recession given the latest PMI releases. Manufacturing slowed down a bit last month while the construction sector marked a noticeable decline in the same period plunging from 51.1 to 48.1 (the consensus called 51.1 as well). It means that managers expect a contraction in construction going forward for the first time since August 2016. In ramification, the GBP is in a small group of currencies that now are losing against USD.

Generally, China is “on vacation” this week but stocks in Hong Kong had only a single day off and surged heavily after the opening. The CHNComp rocketed up by more than 3% to end a recent mini-slump, boosted by global sentiment and good news from the domestic economy. The PBOC announced a somewhat unexpected cut in reserve requirement ratio that should help especially cash-strapped small and mid-sized banks. 

The Reserve Bank of Australia decided to hold rates unchanged what was broadly expected. However, one could notice that the statement was slightly more dovish as usual. Thus, the Australian central bank didn’t follow its counterparts in the US, the euro area, Canada or the UK, and this pushed AUD lower.

Wall Street saw another slate of a rally yesterday as the bulls were in charge after dealing with the key psychological level of 2500 pts. on Friday. There is no DAX (DE30 on xStation) trading on Tuesday as Germany has a day off but Europe opened modestly higher, though the Spanish Ibex (SPA35) now is losing over 0.8% continuing its slump form yesterday.

Today’s data-wise is rather calm, hence the speech from the FED’s Powell (1:30 pm BST) is one of few events worth looking at. Moreover, we get the API report (9:40 pm BST) on crude oil stocks from the US.