feedback
Simon Smith

Oil price recovery supports exporters

We enter the last day of what has been a fairly volatile trading month. Everyone expects August to be quite and it rarely ever is. For example, it was August 2011 when the VIX previously spiked to current levels on the back of the US budgetary problems and ratings downgrade in the US. We have seen the dollar recover through the course of the week but this is more down to the sharp reversal seen against the single currency and also sterling. If you look at the price action on US interest rate ...

Simon Smith

Fed acknowledges new reality

A day of relative stability for Chinese shares, which have been the driving force of sentiment this week, the Shanghai composite trading in positive territory along with most other indices in Asia. The damage to developed market shares has been done though, with the S&P500 still down 7.5% on the month. As for currencies, yesterday was a day of further correction, especially for sterling, with cable down below the 1.55 level, last seen early August. The UK currency had performed pretty well in ...

Simon Smith

Commodity currencies remaining weak

The fallout from Monday's volatility continues to be felt in markets largely devoid of other fundamental drivers. Yesterday's cut in both 1 year lending rates and required reserve ratio appears to have some stabilizing effect, although European equities were already recovering before this news. The move is the fifth cut in rates in the past nine months, so can be seen as following on from the trend of recent months, rather than as an attempt to prop up the tumbling equity market, which has ...

Simon Smith

Stabilisation

Monday was the day when the fear of the unknown truly gripped markets, with diminished August trading volumes serving to massively exacerbate moves. The major volatility stemmed from the kiwi at lunchtime during European trade, which in turn triggered a more than 3 big-figure move on USDJPY. It makes little sense to try and rationalise these moves as they are a function of stressed and illiquid markets. That said, it’s clear that markets are waking up to the implications of a sustained economic ...

Simon Smith

Risk aversion prevails

The Asian session has largely carried through the negative tone that was seen towards the end of last week, with the Shanghai Composite index down another 8%, with other equity markets in Asia down by around 4-5% as a result. A similar picture is emerging in Europe. Last week, the dollar was lagging behind more favoured safety plays, such as the yen, Swiss franc and gold. This pattern has largely been repeated in overnight trade, with USDJPY touching the 121.00 level, which has not been seen on ...

Simon Smith

China concerns gather pace

Not a comfortable end to the week for many markets as ongoing concerns regarding China and emerging markets in general weigh on sentiment. This was pretty evident in stock markets yesterday, down 2% or more in Europe and the pattern has been repeated overnight, with markets in both Japan and China down by nearly 3%. The latest manufacturing PMI data for China, released overnight, added to the bearish tone, disappointing expectations for a modest recovery from last month’s 47.8 reading (above 50 ...

Simon Smith

Dollar reversal on Fed expectations

The release of FOMC minutes to the end of July meeting brought more uncertainty with regards to the timing of the next increase in rates. This can be seen in the reaction of the dollar, down 0.4% on the back of the release. The minutes themselves were expressing caution with regards to the inflation outlook, but were naturally more bullish on the labour market. Herein lies the dilemma for the Fed, whether to look at inflation and expectations thereof, or the labour market. Both form the legs of ...

Simon Smith

Clawing for signs from the Fed

FX and other markets seem to have become less excited by the Fed in the past two weeks or so. The polls of institutions still show expectations positioned for a Fed hike next month, but the pricing in markets has become less convinced and this can also be seen in the latest dollar price action. The latest oil price developments have been playing a part and feeding into forward indicators of inflation. In the background is the global environment, which has become a more significant factor for ...

Simon Smith

Lower volatility prevailing for now

The focus for sterling today will be with the inflation data released at 08:30 GMT. The debate regarding the timing of the first interest rate increase in the UK appears to be gathering strength, even though on balance expectations remains grounded in 2016. We’ve had one member of the MPC voting for higher rates and at the same time, more noises from others on the need for higher rates (as we saw yesterday), even if they are not yet voting for this at the monthly meetings. Although the headline ...

Simon Smith

Sterling higher on rate debate

Cable finds itself around 20 pips higher at the European open on the back of comments from another member of the Bank of England’s MPC outlining the risks of leaving an interest rate rise too late. The comments were in a Telegraph newspaper article, which also outlined the risks of moving too early, but the fact that the debate appear to be getting stronger is the factor that is affecting the currency and making it a little more nervous regarding the prospects of higher interest rates. ...

Simon Smith

A calmer tone emerging

The stabilization seen on the Chinese yuan overnight should make for a more comfortable end to the week. The fix on USDCNY was marginally lower which allowed for a stabilization of the onshore rate and fall in the offshore rate. This also follows on from the comments seen from the PBOC yesterday, playing down the perception that the currency was poised for further and sustained devaluation in the coming weeks. The impact on emerging markets currencies has been notable, but not excessive, with ...

FxProTV

FxPro Interview with TipTV – US Dollar Index

Angus Campbell

Settled markets

Markets are set to commence the day on a softer footing after Wall Street rallied strongly off its lows with investors believing that the recent moves by the PBOC to devalue the renminbi have put a nail in the coffin for a September rate hike from the Fed. This move has formed a clear “hammer” candlestick formation in the Dow Jones index, which is seen as a bullish signal in a downward trend, on top of this the S&P 500 has yet to close below the significant long term trend line indicator 200 ...

Angus Campbell

Renminbi devaluation continues

The renminbi has been one of the most highly controlled currencies in FX and had a quasi-peg against the dollar for some time, but just as we saw from the Swiss National Bank earlier in the year, when economic conditions shift, action has to be taken to adjust the value of a currency to take it to a fairer value. Such moves are usually in the interest of your own domestic economy and since China has been slowing rapidly for years against the backdrop of a slower global economy, it’s little ...

Angus Campbell

China’s move for a reserve currency

News overnight that the PBOC adjusted lower its daily fix for the Chinese renminbi against the US dollar sent USDCNY flying to levels not seen for three years and caught many off guard. It could been seen as a retaliation to the IMF’s recent announcement that they believe it’s too early to give it reserve currency status. The PBOC aims to move the renminbi to a freer floating and accessible currency, prerequisites for it to be given the IMF’s reserve stamp of approval and will see it move in a ...

Angus Campbell

September Fed hike in balance

The US dollar rallied initially following last Friday’s nonfarm payroll even though it was a little below expectations at 215k, the average hourly earnings data was good enough to impress on the dollar bulls and push the greenback higher. Treasury yields also edged higher with the 2 year hovering around a four year high which, if the US data continues to impress, could be broken in a move towards the 0.8000% level. Last week’s dollar strength was assisted by comments from Fed voting member ...