Are we experiencing a calm before a great raging storm?
The Chinese Yuan rebounded from its weakness in the first quarter and reached a four-month high yesterday. USDCNH fell to 6.1820 as the RMB was inspired by the Chinese upbeat economic data released in the weekend. The recent data is showing signs of the Chinese economy gradually recovering and the business confidence has improved. In the mid-term, Chinese Yuan should continue its strength against Dollar.
On the other side of the planet, Argentina is confronting its second default in 14 years as its government has limited reserves to repay the debt that will expire at the end of this month.
Its last sovereign default in 2001 dragged the country into deep recession causing society and political system turmoils. Now, 13 years later, this potential default may again isolate the Argentina from international financial markets and will raise the financial burden of its neighbours, like Brazil. The whole Latin America will be hit by this setting off a chain reaction in the global financial markets. It may be the first domino in a new round of financial crisis. Usually, US dollar and safe-haven assets like Gold will gain from such risk events.
The Aussie Dollar fell from the top of its sideway range implying a continual weakness. The pattern seems to be bearish for the mid-term as the Aussie should not move beyond the 0.9460 and the downward trend line of October 2013. Local traders may be on the lookout for Building Approval data this Thursday and PPI on Friday.
In the Asian market, Chinese stocks were inspired by bright industrial firms’ profits and potential privatization reforms of state-controlled banks. Shanghai Composite surged 2.41% to 2178, a seven month high. The Nikkei Stock Average gained 0.46%. The Australian ASX 200 closed flat at 5577. In the European stock markets, the FTSE closed 0.05% lower, the DAX fell 0.48%, and the French CAC advanced 0.33%. The U.S. closed with little changes as investors are waiting for FOMC meeting and data release in this week. The Dows rose 0.13% to 16983. The S&P 500 closed flat at 1979, while the Nasdaq Composite Index lost 0.1% to 4445.
Today may still be a quiet trading day. Only the U.S. CB Consumer Confidence released at midnight may catch traders’ eyes.
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