Turkish lira is weakening again against the dollar and Pound maintains a level above 1.30
There was a broad risk-off sentiment across all markets before the tentative stabilization into the North American session crossover. There has been no real catalyst cited for the moves, however, Emerging Market weakness is prominent again especially within FX.
The USD/ZAR accelerated higher through the 14.50, driven partly by the weakness in the local stock market as MTN fell 18% due to Nigeria demanding an $8.1b refund. The USD/TRY consequently pulled higher, while the NZD heavily underperformed in the Group-of-10 after disappointing business confidence data. The CHF remained bid after the USD/CHF closed below the 200-DMA yesterday.
European equity markets opened lower and sold-off further, with real estate stocks lagging after negative comments on the sector by Morgan Stanley. All the while, the Dow futures retraced all of yesterday’s rally.
The Japanese Government Bond curve bear steepened slightly overnight, with bunds and U.S. Treasuries well supported by the equity weakness.
In the key headlines for the European session:
- Trump: to maintain a 25% tariff on steel imports and 10% on aluminum; allowing some product exclusions for South Korea, Argentina, and Brazil
- German Regional CPIs y/y (National Est. 2.0%): Saxony 2.0%, Brandenburg 2.0%, Bavaria 2.2%, Baden Wuert. 2.1%, Hesse 1.7%, NRW 2.0%; additionally, Saxony Core CPI 1.4% vs 1.5% prev.
- FT citing an interview with German Deputy Finance Minister: Germany is cooling on the idea of a euro-zone budget which is one of French president Macron’s central demands
- Italy: Moody’s sees EU250b repayment of ECB TLTRO loans between Jun 2020 and March 2021 weighing on the already weak profitability of domestic banks
- New Zealand Aug. Business Confidence -50.3 vs -44.9 prev.; worst in 10 years
- Iran says If it isn’t allowed to ship its oil through the Strait of Hormuz, “there will be no security for others either and no other crude will be exported from this region”
The European session is taken over by the American one, as investors have a medley of economic data to siphon through the day. At the core of these economic data is the Core PCE Price Index, which is the cornerstone of the Fed’s inflation indicator since they use that for their prediction of the inflation in the U.S. Other data include the personal income and spending of individuals in the U.S.
The Canadian economy is also in the spotlight today as talks with the U.S. continue on their inclusion of the already made deal between the U.S. and Mexico as a continuation of the NAFTA deal.
The dollar traded mixed against Group-of-10 peers amid month-end flows and before a report on the Fed’s preferred inflation gauge. The kiwi led losses after New Zealand’s economic data disappointed, while the pound suffered a setback on fresh Brexit headlines. The euro edged lower and core European bonds edged higher after figures showed price pressures eased slightly in most German states. Treasuries gained as stock markets came under pressure.
EUR/USD – Completes Wednesday daily DeMark sell setup, bears need to defend 1.1740-80 area to keep downside prospects intact and essentially keep the pair in a 1.15-1.18 range; Bloomberg Trender Indicator on the weekly suggests below 1.1790, the euro stay defensive.
GBP/USD – Wednesday’s rally, the biggest in seven months, brings a test of pivotal resistance faster than even the most optimistic bulls could have hoped for; this means momentum studies aren’t yet overstretched and a test of 55-DMA and trendline resistance may come soon enough; failure could see a deep corrective pullback while strength changes the pound’s technical picture altogether.
USD/JPY – Consolidates amid signs of bullish bias
AUD/USD – Orbits 21-DMA as it looks for direction, bearish bias
EUR/CHF – Mean reversion satisfied on 21-DMA test, weekly close to signal next leg
USD/ZAR– The rand is behaving more erratically this month than it did during the height of the power struggle between former President Jacob Zuma and current President Cyril Ramaphosa in December.
The notoriously volatile currency has traded between R13.18 and R15.55/$ during August amid thin liquidity, with many northern-hemisphere market participants on summer vacation.
This week alone, it dipped below R14/$ on Tuesday after a report on the land reform process briefly cheered traders. But by Thursday, it had weakened beyond R14.50/$ as concerns over Turkey and Argentina weighed on emerging-market currencies.
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