Dollar keeps steadier ahead of European trading

In case you missed it:

• It’s finally Joever
• PBoC announces cut to 7-day reverse repo rate to 1.70% from 1.80%
• China cuts 1 and 5 year loan prime rates by 10 basis points each
• PBOC to lower collateral for Medium-term Lending Facility (MLF) loans

Joe Biden officially drops out of the presidential race and has endorsed Kamala Harris to take over the mantle in challenging Trump in November. Now, her candidacy is not set in stone just yet. Other Democrats still have the opportunity to challenge her at the DNC next month. But it will be an extremely tough one now after Biden’s endorsement of course.

Then, earlier today we have China announcing more easing measures to try and bolster economic activity. After the Third Plenum pledges last week, they are taking quick action to try and shore up market confidence – which has been lacking amid the absence of specific details since.

That has put more pressure on the Chinese yuan and even with the stronger fix today, USD/CNY is pushing up to 4.27 levels. The trend this year has been rather one-sided, as Beijing is mostly just managing the yuan depreciation to be gradual and smoother.

Amid a softer yuan, the aussie and kiwi are also down slightly on the day. Both AUD/USD and NZD/USD are down 0.2% to 0.6670 and 0.5995 respectively now.

Meanwhile, the dollar itself is keeping mostly steadier across the board. There’s no big reaction to Biden bowing out as Trump remains the strong favourite to take the November election still. 10-year yields in the US are down 1.6 bps to 4.223% though. So, that’s one spot to watch in the session ahead.

In the equities space, the mood music is also calmer with S&P 500 futures seen up 0.1%. It’s still early in the day though and one has to keep in mind the heavy selling from last week. Wall Street limped into the finish line, so is this the time where stocks bounce back again to maintain the July hot streak?

This article was written by Justin Low at www.forexlive.com.