China surprisingly weakened the yuan further for a second time this week, at a much lower level than expected thus firing up a virtual trade war concern. Chinese stocks and indices slumped 7% on Thursday triggering the circuit breaker mechanism and resulting in the Shanghai and Shenzhen markets to close for today. Affected by the news, the Australian and New Zealand Dollars dropped to multi-week bottoms reaching $0.70228 and $0.66117 respectively. Earlier on Thursday Australia’s trade deficit was reported at 2.9 billion AUD while its building approvals dropped 12.7% in November.
The British pound fell to its lowest point since April against the US dollar after disappointing Services PMI data which was also an indication that the BOE will not be raising rates soon. The US dollar dropped from monthly highs against the other major currencies late on Wednesday after the Fed policy meeting minutes signaled gradual rate increases because of low inflation. Following China’s central bank decision to lower yuan, the US dollar dropped even further reaching down to 117.653 against the Japanese yen, a more than half a percent drop. This is the lowest it’s been since the end of August. In Energy news, Brent oil hit a new eleven year low while Crude oil dropped to a new low after already being hit by declining inventories. Crude was last trading at $33 and Brent at $33.30 after its biggest daily drop in over four months.
The focus for Thursday is the US Unemployment Claims news due at 13:30 GMT. Just one more day before the year’s first NFP report, with expectations indicating a 203K change and unemployment remaining at 5.0%.