On 2nd of August, the Cabinet of Japanese Prime Minister Shinzo Abe adopted a new economic policy stimulus package of more than 28,000 billion yen (274 billion dollars).
The Japanese government estimates that with this economic stimulus package the country will increase GDP by 1.3% in the context that the domestic economy is facing a strong reduction of consumption, private investment, slow growth of economic world and risks.
Due to financial difficulties, most of the economic stimulus package will not rely on the general budget, which is removed from the financial loan and investment programs.
It is expected that the draft budget will be submitted to an extraordinary session of Japan's parliament convened in mid-September.
On Tuesday, the evergreen buck hovered close to three-week minimums after soft American economic data undermined the case for an early Fed rate lift while the Australian dollar geared up towards the likelihood of another policy easing later in the day.
The dollar index against a basket of six counterparts was worth 95.758, having dipped to as low as 95.384 the previous week when it reported its biggest descend for three months.
The index has struggled to gain a meaningful recovery since after the issue of quite poor American GDP growth for the June quarter the previous week.
Weaker-than-expected manufacturing data published on Monday kept holding the US dollar down. Asie from that, the influential Institute for Supply Management's index of national factory activity sagged to to 52.6 in July from June’s reading of 53.2, below market hopes for 53.0.
As for Fed funds futures, they’re pricing in less than a 40% probability of an interest rate lift by December.
Aussie heads south after data
The Australian dollar retraced earlier weakness notwithstanding downbeat trade as well as building approvals data and the Japanese yen sagged on the finance minister’s comments.
The currency pair AUD/USD was worth 0.7537, tumbling 0.01%, while USD/JPY traded at 102.67, showing a 0.24% rise after Japanese Finance Minister Taro Aso told exchange rates were demonstrating very nervous moves and that he was attentively watching currency movements. Aside from that, Prime Minister Shinzo Abe's government was about to approve ¥13.5 trillion in fiscal measure to boost the economy and also prices.
In Australia, June’s building approvals sagged 2.9%, compared to a 0.5% revenue seen month-on-month as well as the trade balance widened to a deficit of A$3.195 billion right from an expected deficit of about A$2 billion as well as last month’s figure of A$2.418 billion.
Later, New Zealand published inflation expectations for the second quarter, including the previous figure 1.6% quarter-on-quarter. The currency pair NZD/USD was worth 0.7172.
On Monday, during European trade gold prices slumped as market participants considered buying into surging equity markets rather than buying safe-haven assets, though prices kept to three-week peaks amid waning hopes that the Fed will lift interest rates a bit later soon.
In New York, December delivery gold futures slumped 0.18%, being worth $1,355.05 per troy ounce.
On Friday, gold prices leapt to a daily high of $1,362.00, the greatest value since July 11, after data demonstrated that the American economy surged much slower than expected during the second quarter, thus bringing the greenback to five-week minimums and helping market players to roll back hopes for a rate lift from the Federal Reserve.
The second quarter GDP boasted a 1.2% annualized growth rate, which is below hopes for a 2.6% surge, as the Commerce Department reported on Friday. as for the first quarter GDP, it got revised lower from 1.1% to 0.8%.
The disappointing data lessened the overall threat of an early interest rate hike from the Federal Reserve.
U.S. crude breaks below $40 as oil ends down 4 percent on glut
Reuters - U.S. crude tumbled below $40 per barrel on Monday for the first time since April, as oil prices settled down nearly 4 percent on heightened worries of a crude glut despite peak summer fuel demand.
A near 15-percent slump in U.S. crude prices in July, the worst monthly loss in a year, also triggered liquidation as trading began for August.
U.S. West Texas intermediate (WTI) crude plumbed $39.86, its lowest since April 20, before settling at $40.06, down $1.54, or 3.7 percent.
Brent crude closed down $1.39, or 3.2 percent, at $42.14 a barrel, after a session low of $41.87.
Not all oil statistics are bearish. A Reuters poll on Monday showed U.S. crude stockpiles may have fallen last week for the first time in 10 weeks.
Other data from last week showed the United States added 44 oil drilling rigs in July, the most for a month in two years, intensifying concerns that global production could again get to unmanageable levels like in 2014-2015.
Crude prices remain nearly 55 percent above 12-year lows of $26 to $27 hit in the first quarter.
But WTI and Brent have also slipped into bear market territory since last week after losing more than 20 percent from the 2016 highs above $50 that were hit in June.
On Monday, the Australian dollar stood still against its American counterpart, while the New Zealand dollar ascended after the release of China’s mixed manufacturing activity and Friday’s downbeat growth data kept weighing on the greenback.
The currency pair AUD/USD stood still at 0.7615, which is the highest value since July 15.
Data earlier demonstrated that in July China’s official manufacturing purchasing managers’ index ticked slumped to 49.9 from 50.0 last month, compared to hopes for an unchanged reading.
Meanwhile, the previous month, the Caixin manufacturing PMI headed north to 50.6 from June’s reading of 48.6, compared to hopes for a leapt to 48.7.
By the way, China appears to be Australia’s number major export partner and also New Zealand’s second biggest export partner.
As for NZD/USD, this currency pair soared 0.11%, being worth 0.7215, which is close to Friday’s two-week peak of 0.7233.
On Friday, the Commerce Department drew attention to the advance read on the second quarter, when American GDP disclosed a 1.2% annualized growth rate, which is below 2.6% expectations.
Dollar pulls away
The evergreen buck pulled away from minimums it achieved following gloomy American growth figures late the previous week, while the Japanese yen pared some of the huge revenues generated after the BOJ disclosed a much smaller stimulus than it was actually expected.
The dollar index, normally tracking the major American currency against a basket of key six counterparts, grew 0.1% being worth 95.578, thus rebounding from its Friday minimum of 95.384, its lowest value since July 5.
American GDP edged up at an annual 1.2% during April-June,and Commerce Department figures unveiled on Friday, demonstrated a slight drift from the 2.6% surge forecast by financial experts surveyed by Reuters.
The greenback’s advance was blocked in its tracks by the downbeat Q2 GDP figures.
The dollar index's next immediate technical target hit 94.75, as market speculation of an approaching interest rate lift keeps fading.
The FOMC statement earlier this week didn’t leave the impression that a September rate lift was quite probable and with mediocre growth numbers, the odds kept downgrading further.
On Monday, crude-oil prices kicked off August in rather a choppy trade because ongoing glut in refined and crude oil keeps exerting pressure on crude prices.
In New York, September delivery light and sweet crude futures traded at $41.75 a barrel, showing a $0.14 rise. Meanwhile, the October contract of Brent crude gained up to $0.18, being worth $43.71 per barrel after the initial dip at the start of the trading session.
The market appears to be more volatile also erratic ahead of the expiry of a contract because market participants are on the verge of rebalancing their books by simply covering their long or short trading positions.
However, supply and demand trends in the crude market are still lopsided, while prices are most likely to move sideway in the nearer future especially considering the absence of strong push or pull factors.
Over the weekend, American crude prices clawed back some ground after the major American currency got sold heavily.
Asian shares hit one-year high
Asian stocks managed to hit a one-year peak, following gloom American economic growth data, which ruined hopes that the Fed would lift interest rates in the nearer months.
American GDP surged at a 1.2% annual rate during the April-June period, which is less than a half of a 2.6% growth rate economists had expected.
Market participants have been shifting their money to Asia, that’s likely to be least influsenced by Brexit, while the Fed appears to be in no hurry to increase its interest rates.
MSCI's broadest index of Asia-Pacific stocks outside Japan soared 1.3%, getting to the highest level for about a year.
European shares are supposed to head north, with spread betters looking at surge of 0.7% in Germany's DAX as well as 0.4% in the UK’s FTSE.
Asian markets demonstrated quite limited reaction to a better-than-expected private poll on China's factory sector.
Meanwhile, the Caixin/Markit Manufacturing Purchasing Managers' index or PMI ascended to a 1 1/2-year peak of 50.6, thus beating market expectations for 48.7.