Risk sentiment took another twist in overnight trading with the market responding strongly to rebounds in commodity markets and equities in China. The risk-on environment led to a marginal softening of the Greenback with the US Dollar Index now treading water at 94.61, a measly 0.02% lower. Ultimately however, commodity currencies are higher against the United States Dollar with most other majors remaining relatively flat.
With a mostly benign day on Twitter, attentions turned towards China which recently announced policy measures to add liquidity and encourage banks to lend more to small business’. The PBOC also mentioned measures to ease monetary policy and ramp up fiscal policy. China did fall short of announcing a big stimulus package but nevertheless the direction was clear, and the market responded accordingly. Chinese equities were boosted by approximately 5% since Friday with commodity prices also benefiting. USD/CNY dipped slightly below 6.8, reversing the upward trajectory the Greenback has been on. Commodity currencies also recovered strongly with he Aussie being the best performer, up almost 0.5%.
The Greenback is now set to enjoy a quiet economic calendar for Wednesday with direction to be determined by the headlines and off-shore risk events.