Talking Points

  • Asian stocks struggled with a weaker US Dollar once again
  • The Australian Dollar got an especial boost as investors mulled its central bank’s latest meeting minutes
  • The New Zealand Dollar was hit by underwhelming inflation, but recovered

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Asian markets wilted Tuesday as the US Dollar took a hammering on news that political efforts to overhaul US healthcare had stalled.

The Nikkei 225 lost 0.6%, with the ASX 200 down 1.2% and all other major regional bourses in the red. Chinese stocks' falls may have been exacerbated by news that Beijing is looking into credit risks associated with property developer Sumac, after this week’s similar action against rival Dalian Wanda. Official data from China also showed significant property market cooling with average prices in Beijing down for the first time in two years.

The US Dollar headed South against just about everything after two more Republican senators opposed their own party’s healthcare bill. Four have now dissented. This difficulty in the bill’s passage raises doubts about other planned legislation, notably in the area of tax reform. Coupled to investors’ recent rethink about the likely pace of Federal Reserve interest-rate rises, the political picture in Washington made life very tough for the greenback. It fell to lows not seen since September, 2016 against a basket of its widely-traded rivals.

The Australian Dollar made gains following the release of minutes from the Reserve Bank Australia’s July monetary policy meeting. While there was little new in the minutes, rate setters did suggest that the “neutral” interest rate- that which neither stimulates not subdues the economy, was as high as 3.5%. With the Official Cash Rate at a record low of 1.5%, that nugget reportedly had some in the market mulling the possibility that the RBA was priming markets for higher rates, although the RBA has offered no sign since July 4’s policy meet that this is so. The New Zealand Dollar meanwhile took a knock as inflation in its homeland slowed by more than expected.

Gold prices traded around two-week highs as risk appetite faded a little. Crude oil prices bounced a bit from Monday’s sharp, supply-related falls.

The European and North American sessions will bring plentiful economic clues. The European Central Bank’s lending survey is coming up, as are Consumer Price Index data from the UK. Germany’s ZEW survey is also on tap, with US import and housing prices also headed investors’ way.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX