Risk Trades Edge Back With China in Focus

Trading was tentative to start a week that is filled with risk events. The Canadian dollar was the best performer while commodity cousins AUD and NZD lagged in an unusual development. Australian business confidence and Japanese machine orders are the highlights of Asia-Pacific trading.

The euro slid back to 1.2760 from 1.2800 in US trading as broad risk sentiment ticked lower. The focus was on China after soft economic data and fresh plans to boost infrastructure spending. Sentiment was mixed for most of the session but slipped late in the day.

The first drop in US consumer credit in 10 months contributed to the pullback in risk appetite. So did a Chinese announcement that retail gasoline and diesel prices will rise 6%. The IMF also cut its estimate of Irish 2013 growth to 1.4% from 1.9%.

The market is focused on Wednesdays German court decision on the constitutionality of the ESM. That decision could be delayed by a fresh legal challenge from a German lawmaker on Monday but early indications are that it will be delivered on schedule.

At 2130, Australias NAB releases its monthly survey of business confidence. The index rested at 4 in July and likely fell on talk of foreign investment slowdowns.

In Japan, at 0600 GMT, August preliminary machine tool orders will be released. In July, orders fell 6.7%.

Continued speculation about further Chinese stimulus could dominate Asia-Pacific trading and AUD movements. The market is also keeping an eye on rumors about Xi Jinping, the man expected to take over as leader of China in the coming months. He has cancelled numerous appointments in the past 10 days and speculation about his health is rampant.

-AB