Will the decline in the Chinese market affect European currencies?

Will the decline in the Chinese market affect European currencies?

28.07.2021

Yesterday, the three major U.S. stock indices all fell, creating a risk-off sentiment characterized by falling stock prices, lower interest rates, and cheaper crude oil. In addition to the U.S. market, the Chinese market also saw a sharp decline. The Hong Kong Hang Seng Index fell by about 5% on concerns over tighter regulations imposed by Chinese authorities on the IT and education sectors. The yield on the 10-year U.S. Treasury note remained unchanged at 1.24%.The VIX (fear index) rose by more than 10% to 19.3.

With the yield on the 10-year U.S. Treasury note facing resistance, the U.S. dollar is also struggling to gain ground. The EUR/USD pair has been rising since yesterday’s European session, rebounding by about 70 pips from 1.177 to 1.184. Following yesterday’s rally, the pair is now approaching the 20-day moving average (MA) on the daily chart. We are at a point where we need to assess the direction of the market to determine whether today’s daily close will signal a return to an upward trend.

Today, at 3:00 PM, the German GfK Consumer Confidence Survey and German Import Price Index, as well as UK Nationwide House Prices, will be released; at 3:45 PM, the French Consumer Confidence Index; at 8:00 PM, the U.S. MBA Mortgage Applications Index; at 9:30 PM, the Canadian Consumer Price Index and U.S. Wholesale Inventories;at 11:30 PM, the U.S. Weekly Crude Oil Inventories; at 3:00 AM, the FOMC policy rate decision and statement; and at 3:30 AM, a press conference by Fed Chair Powell. We will be closely monitoring whether European markets, which have been affected by the decline in Chinese markets, can maintain their momentum following today’s economic releases.