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Forex: 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 ...

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Forex: 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 ...

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Forex: 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 ...

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Forex: 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 ...

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Forex: 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 ...

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Forex: 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 ...

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Forex: 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 ...

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Forex: 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 ...

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Forex: 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 ...