Daily Snapshot [August 17, 2018] – FX, Oil, T-Note, Bund, S&P500

August 17, 2018 – Market review and metrics for Forex, Oil, T-Note, Bund and S&P500

Last trading day of the week ends on a risk-on mode as commodity based currencies (CAD, NZD, AUD) were higher while USD was the weakest performer.

FX Strength

Canadian July CPI posted the largest m/m reading since 2011 which promptly saw the Loonie surge across the board. The “core” numbers though met market estimates which would seem to suggest that volatility in energy prices might have contributed to the surprise. That said, market odds for a rate hike jumped from the low 20% to the low 30% area. Clearly the market would like a few more data points to see if this was an outlier or a nascent sign of an uptick in inflation. If it is the latter then upcoming BOC’s monetary policy decision(s) would become more of an event as they juggle the need to manage inflationary forces with concerns about NAFTA negotiations.

Market Metrics

US equity markets ended the day higher apparently choosing to focus on the resumption of US-China trade talks and ignoring, for the time being, the simmering issues in Turkey that are evoking memories of past emerging market crises. A quick use of the “google machine” would reveal that these local flash points have invariably had an effect on a global scale and it has not been pleasant. (maybe this time it’s different !?)

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Daily Snapshot [August 16, 2018] – FX, Oil, T-Note, Bund, S&P500

August 16, 2018 – Market review and metrics for Forex, Oil, T-Note, Bund, S&P500. {updated EOD}

FX Strength

The S&P500 staged an impressive rebound, erasing most of yesterday’s decline, on the heels of better than expected Walmart earnings and, perhaps more importantly, optimism that renewal of US – China trade talks might yield a mutually beneficial outcome. Antipodean currencies were the prime beneficiaries while CHF was the laggard as risk appetite came to the fore. Oil prices stabilized but worries about global economic slowdown persist. All in all it seems like the “calm before the storm” given that the issues confronting the global economy are varied and complicated and would require skillful navigation by all involved to bring about a successful resolution.

Market Metrics

Daily Snapshot [August 15, 2018] – FX, Oil, T-Note, Bund, S&P500

August 15, 2018 – Market review and metrics for Forex, Oil, T-Note, Bund, S&P500. {updated EOD}

USD strengthened initially as worries about slowing Chinese growth, Turkish uncertainty, and upbeat domestic retail sales gave it a bid, albeit one with a safe-haven tinge. As the “FX day” progressed  this reversed as the downturn in equity markets worldwide, especially in the emerging market sector, saw investors abandon the US unit to seek refuge in traditional safe haven currencies, namely JPY & CHF.

Oil futures fell sharply after weekly US crude stockpiles data rose more than expected which the market interpreted as a harbinger of weaker global economic growth. This propelled the CAD to “win” the title of the worst FX performer of the day.

Market Metrics

EUR was on the back foot early on concerns over Erdogan’s economic policies and his apparent eagerness to engage the US on trade disputes. The resultant effect that such a posture could have on the European banking system saw the common currency plumbing depths not seen in 2018 as the NY session began. It staged a rebound on news that Qatar pledged to invest $15 billion in Turkey, a move seen to be supportive to the banking system.  The bond markets seemed unimpressed as flight to safety saw German Bund yields hit their lowest levels in over a month. Historically, these type of events DO NOT “fix” themselves this quickly. Stay tuned !

FX Strength

The Yuan’s ongoing slide was a reflection of disappointing economic data that has characterized Chinese growth recently and has stoked speculation that the PBOC would intervene to stem its currency from declining further. The cause for anxiety lies in the fact that a precipitous drop could cause global liquidity issues.