Risk-on sentiment gripped markets on Friday, driving the Nikkei to fresh record highs in Asia after Wall Street’s main indexes closed at record levels overnight. Investors added to bets on faster Fed easing following the sharp jump in U.S. jobless claims, reinforcing the view that back-to-back cuts are on the way. The dovish shift has boosted equity markets globally, while weighing on Dollar as traders prepare for more policy support.
In FX, Aussie and Kiwi dollars are the clear outperformers for the week so far. Both are buoyed not only by risk-on flows but also by growing expectations that China will step up stimulus measures to support domestic demand. Rising Chinese equity markets and strong commodity sentiment have amplified the move. Sterling ranks as the third strongest, with its performance notable given soft UK GDP data that reinforced signs of a renewed slowdown. Traders appear to be giving more weight to global risk appetite than domestic headwinds.
On the weaker side, Loonie continues to lag as markets expect the BoC to resume its rate-cutting cycle this month. Dollar is also under pressure, followed closely by the Yen, which is weighed down by the Nikkei’s surge to new records and the accompanying outflows. Euro and Swiss Franc are trading in the middle of the pack.
On the trade front, Washington is preparing to pressure G7 partners to impose higher tariffs on China and India over their continued imports of Russian oil. According to a Kyodo report, U.S. officials will push the issue at a virtual G7 finance ministers’ meeting Friday, underscoring the White House’s push to tighten funding channels for Moscow. The U.S. has already imposed punitive duties on India, while China has been shielded by a temporary tariff truce.
Meanwhile, China warned Mexico against planned tariff hikes on Asia-made autos, calling the move a threat to free trade. The Mexican government is considering raising duties from 20% to 50%, targeting Chinese exports in particular. Separately, U.S. Treasury Secretary Scott Bessent will meet Chinese Vice Premier He Lifeng in Madrid next week, marking their fourth major dialogue this year as both sides work to maintain their tariff truce through November.
In Asia, Nikkei closed at new record, up 0.97%. Hong Kong HSI is up 1.31%. China Shanghai SSE is up 0.01%. Singapore Strait Times is down -0.23%. Japan 10-year JGB yield rose 0.014 to 1.592. Overnight, DOW rose 1.36%. S&P 500 rose 0.85%. NASDAQ rose 0.72%. 10-year yield hit intraday low of 3.966 then closed at 4.011, down -0.021.
UK GDP stalls in July, services offset weak production
UK GDP was flat in July, matching expectations, as modest growth in services and construction offset a sharp drop in production. Services output rose 0.1% and construction gained 0.2%, while production fell -0.9%, highlighting ongoing weakness in the industrial sector.
Over the three months to July, GDP rose 0.2% compared with the previous three-month period. Services expanded 0.4% and remained the key driver of growth, while production fell -1.3% and construction rose 0.6%.
NZ BNZ manufacturing slips to 49.9, sector weakness persists, optimism patchy
The latest BusinessNZ PMI showed New Zealand’s manufacturing sector stalling in August, with the index slipping to 49.9 from 52.8. BusinessNZ’s Catherine Beard noted the industry “has yet to turn the corner toward sustained growth,” with the reading underscoring patchy conditions and fragile confidence despite being only marginally below the neutral threshold.
The breakdown highlighted a mixed picture. New Orders rose strongly to 55.2, the highest in two years, hinting at improving demand momentum, while raw material deliveries remained in expansion at 50.5. Offsetting this, production fell to 46.6, while employment (49.1) and finished stocks (47.1) also contracted, dragging the overall index lower.
Nearly six in ten respondents offered negative comments, citing flat sales, customer caution, rising costs, and global uncertainty as key drags. Although the proportion of negative feedback has eased from June’s high, sentiment remains weak, and businesses see recovery as tentative at best.
AUD/USD Daily Report
Daily Pivots: (S1) 0.6612; (P) 0.6639; (R1) 0.6687; More...
AUD/USD’s rally continues today and intraday bias stays on the upside. Current rally from 0.5913 should target 0.6713 fibonacci level. Decisive break there will carry larger bullish implications. On the downside, below 0.6589 minor support will turn intraday bias neutral first and bring consolidations.
In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. While stronger rally cannot be ruled out, outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, sustained break of 0.6713 will be a strong sign of bullish trend reversal, and path the way to 0.6941 structural resistance for confirmation.
