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.
FX Diem 