Soggy sterling

17 February, 2016

Often with markets it’s a case of knowing whether the tail is wagging the dog. In other words, to what degree is the turmoil in markets a reflection of the financial risks and real economy, or is the ultimate risks to the real economy that are driving the volatility in markets. The reality is that it’s often an inter-play between the two and it’s in this light that the price action of this week should be viewed under. In FX, this has been most apparent in the yen, which has powered USDJPY from nearly 122.00 at the start of the month, to 111.00, then to the 114-115 area in the recent correction. The correction is modest in light of the move seen, didn’t pass the key Fibonacci level (38.2%) and USDJPY moved lower yesterday and in the Asia session. So whilst we’ve seen some positive signs other markets (such has high levels of corporate bond issuance yesterday, including USD 12 bln from Apple), there remains a message of caution from FX markets.

For today, it’s the yuan that has caught the attention, with the fixing on USDCNY higher for the past two sessions and this reversing the strengthening of the yuan seen for most of the year to date. It’s sometimes difficult to interpret some of these moves on the Chinese currency, but it can be said that it seems the authorities don’t want the currency to be seen as a one-way bet in either direction. We have minutes to the January FOMC meeting later today, but these should be seen as low risk given that markets are not expecting any moves from the US central bank in the coming months. We also see UK labour market data at 09:30 GMT, which could be in greater focus given the volatility seen in sterling yesterday. Given the lack of reversal seen so far today, then it could be that any firmer data is taken as a selling opportunity, given the current negative tone on the UK currency.


Source link  
Markets recede from the recent highs

A strong Nonfarm Payrolls caused pressure on the stock markets, reducing the chances of the interest rates lowering by the Fed in the upcoming months...

Gold resumes rally, pushing past $1400

Gold prices resumed a push higher on Monday, as flows into the precious metal continued on improved prospects for easier monetary policy from...

Gold rises as markets slip

Market caution continues to support gold. Quotes of this metal rose to $1337, repeatedly trying to push above this year highs at the 1340-1360 area...


Trump says Brexit should happen

President Donald Trump promised the U.K. a "phenomenal trade deal" Tuesday, on the second day of his state visit to Britain...

Euro and Gold instead of Dollar

Gold rose on Monday to the highest levels since February, reaching $1327 per ounce. In the first hours of the Tuesday trading session, there...

Markets recover after the drop

The markets decline on investors' fears that trade conflicts will drag on and slow down demand, and this dynamic coincided with breaking through important...


Markets pressured by Huawei problem

Alphabet and some other American IT companies have suspended business with Huawei, which is one of the first examples of major consequences for...

The climate is changing rapidly

British people need to fly less, drive electric cars, eat little meat and turn their home thermostats down to 19 degrees Celsius (66 Fahrenheit) in order to rein...

Chinese stocks saw their worst week

Chinese stocks have taken investors on a ride this year. Shanghai and Shenzhen have been the best performing global markets this year, with the Shanghai...

  


Share it on:   or