The safe-haven dollar edged higher as China's economic data disappointed
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The safe-haven dollar edged higher as China's economic data disappointed

Monday's European stock market opening is expected to be mixed amid concerns about slowing global growth following weak Chinese economic data. This gave a shot to the dollar to rise cautiously against other major currencies

In a surprise move, China's central bank, in response to economic data released earlier Monday, has cut key lending rates for the first time in nearly a year due to the economy's unexpected slowdown in July.

The Chinese economy, which is the world's second-largest, is struggling to recover from the impact of COVID restrictions that hit growth in the June quarter. The economy unexpectedly slowed in July, further triggering concerns about the demand for crude oil at the world's largest buyer of crude oil, significantly as the refinery output slumped to less than 12 million barrels per day, the lowest level since March 2020.

Industrial output increased 3.8% in July from a year earlier, which was lower than the predicted 4.6% increase. Retail sales grew by 2.7%, below forecasts of 5.0% growth and a lower rate than June's growth of 3.1%.

The oil price fell on Monday due to concerns about slowing growth in China and possible increases in oil supply by oil giant Saudi Aramco. The rebound in fuel exports from China, the world's second-largest refiner, has also contributed to the cooling down of global prices, which hit record highs in May and June due to western sanctions on Russia following the Ukraine war, tightened the global market for refined fuels.

Furthermore, it has been reported that Saudi Aramco stands ready to increase its crude oil output to its maximum capacity of 12 million barrels per day if the Saudi Arabian government requests it, Amin Nasser, the company's chief executive, said on Sunday, after the company reported one of the largest quarterly profits in the company's history.

While the Chinese economy is slowing enough for the central bank to cut interest rates, the Federal Reserve is evaluating how much rate hike it will need to make in the near future. With this in mind, releasing the minutes from the Fed's July meeting, which will take place on Wednesday, will be firmly in the spotlight. In addition, the retail sales data on Friday should give us some new insight into the state of the economy.

US Commodity Futures Trading Commission data released on Friday shows that speculators decreased their net long US dollar positions last week despite Monday's dollar gains. According to the Dollar Index, which measures the greenback's value against a basket of six other currencies, the greenback traded 0.2% higher at 105.750. This was near the middle of its recent trading range.

The European stock market closed higher last week thanks to companies that have mainly delivered better results than expected so far this quarter, which helped boost stock prices. On Monday, Henkel, the German consumer goods maker, will be the focus of the latest big batch of earnings released this week.

In July, the European Central Bank raised interest rates by half a point. It is expected to do the same in September, despite the risk of a Eurozone recession reaching its highest level since November 2020. This is because energy shortages threaten to drive already record inflation even higher, as well. From this perspective, the lowering oil prices and solid earnings reports contribute to a short-lived stock rebound, followed by investors cautiously.