Market wrap: risk sentiment improved from Asia into Europe

Analysts at Westpac Banking Corporation explained that European and US equities posted decent gains, with investors welcoming a planned US-China meeting on trade and retailer earnings strong.

Key Quotes:

"AUD/USD found support from the rebound in the Chinese yuan, consolidating around 0.7260. Today we see testimony from RBA governor Lowe and generally low key data elsewhere.

Risk sentiment improved from Asia into Europe, with many pointing to the announcement of a visit to the US by Chinese officials next week to discuss the trade dispute. Strong earnings reported by giant retailer Walmart helped. Optimism faded a little in the NY afternoon, the S&P 500 trimming gains and AUD/USD slipping, as the US pledged new sanctions on Turkey if the US pastor is not released, while President Trump was quoted saying China was unable to give the US an acceptable trade deal.

EUR/USD rose from 1.1360 to 1.1409 but retraced late NY, up 0.3% over the day. USD/JPY had bounced 40 pips to 110.90 during Sydney trade on the China trade talk news and ultimately consolidated around that level late NY.

AUD/USD extended the day’s gains from 0.7260 to 0.7286 but retraced late NY. The spark appeared to be a rally in the Chinese yuan (CNH +1.25%), backed by the trade talk news, rather than Australia's employment report. NZD similarly rose from 0.6580 to 0.6608 before retracing. AUD/NZD was dead flat over the day at 1.1025.

UK retail sales were much stronger than expected in July, volumes ex-fuel rebounding 0.9%mth from June’s -0.6%, for annual growth of 3.7%. GBP/USD rose 30 pips on the data but over the day was only a fraction higher, around 1.2715.

The Philadelphia Fed Business index fell from 26 in July to 12 in August, new orders notably weaker, and employment and prices moderating. It was a rare weak reading among the regional business surveys. Housing starts rose only 0.9% in July (vs 7.4% expected), after -12.9% in June."

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