Euro rebounds as markets find relative calm

After the Monday Mayhem from the Turkey contagion, a sense of calm descended on FX markets during today’s Asian session. USD/TRY headed lower from its record high yesterday as the markets digested the impact and effectiveness of the central bank’s measures announced yesterday.

Selling of emerging currencies eases

The move in USD/TRY prompted other emerging currencies to stage a bit of a comeback against the US dollar with USD/ZAR dropping 8.4%, USD/MXN 2.7% and USD/INR 0.75%. EUR/USD also benefited from the US dollar’s retreat, rising 0.16% to regain the 1.14 handle. Equity markets also had a respite, with the Nikkei225 gaining 1.23%, Australian shares rose 0.66% while the Singapore30 added 0.54%. The only black spot was China where disappointing data knocked 0.51% off the index.

EUR/USD Daily Chart

Source: Oanda fxTRade

China data disappoints

China released a set of second-tier data for July today and each data point came in below expectations. Retail sales grew 8.8% y/y after 9% growth in June and missed analysts’ expectations of steady 9% growth again. Industrial production held steady at +6.0% y/y though was also mellow forecasts of an increase of 6.3% while fixed asset investment missed with 5.5% annual growth versus expectations of a 6.0% gain. The jobless rate rose to 5.1% in July from 4.8% but Chinese officials were quick to point out that this was due mainly to seasonal factors.

Officials also commented that the other data pointed to a steady economy even though the domestic and international environment had become tricky with the effects of global trade tensions starting to show up in the global economy.

Australia’s second-tier data was mixed with the NAB business conditions index sliding to 12 in July from 15 in June though the more forward-looking confidence index improved a notch to 7 from 6. The Aussie has move higher on the day though this is more likely due to the US dollar’s dip rather than anything from the data.

Source: MarketPulse

The full data calendar can be viewed at https://www.marketpulse.com/economic-events/

Euro-zone Q2 GDP revision on tap

There is not much of an expectation for Euro-zone Q2 GDP to be revised from the provisional reading of +0.3% q/q and +2.1% y/y. That said, industrial production could show a contraction of 0.4% m/m in July, according to economists’ forecasts. From Germany we can expect ZEW sentiment surveys which have been generally trending lower over the past six months while the UK releases unemployment and average earnings data. The US data calendar is relatively mundane with export/import prices followed by the weekly API crude inventories.

OANDA Market Beat: Risk Aversion Boosts Dollar

Source: Oanda MarketPulse

US Futures Higher After Second Plunge This Week

Indices Remain Vulnerable After Entering Correction

US futures are trading slightly in the green ahead of the open on Friday, a day after stock markets once again tumbled leaving indices in correction territory.

As we saw on Thursday, this isn’t necessarily indicative of calm returning to the markets. The Dow recorded declines of more than 1,000 points for the second time this week, having never done so before, despite futures prior to the open being relatively unchanged on the previous days close.

Equities Lose $5 Trillion as Bulls Slay Bulls

Clearly there remains a lot of volatility and nervousness in the markets and I don’t expect this to ease up heading into the weekend. Stock markets will likely remain vulnerable to further shocks heading into today’s close and possible even next week. That said, with a 10% correction having now completed, I wonder whether investors will now start looking to buy the dips as the fundamental backdrop remains strong.

OANDA fxTrade Advanced Charting Platform

US Congress Passes Funding Bill Ending Brief Government Shutdown

On a more positive note, the House and the Senate approved a new funding bill in the early hours of Friday morning that will see the government through to 23 March and increase spending limits for two years, ending a showdown that came into effect overnight.

Markets haven’t been too concerned about the prospect of a shutdown since the start of the year despite two having now taken place so I don’t expect to see any boost now that a deal has been reached. This is merely just another self-inflicted risk that’s been temporarily averted.

CAC Loses Ground as Global Sell-Off Continues

Sterling Dips After Worrying Manufacturing Data

It’s a slightly quieter day in terms of notable economic events. The Canadian jobs data will be of interest given that the central bank has been relatively aggressively raising interest rates over the last six months. The UK GDP estimate from NIESR will also be of interest, given that the pound has continued to rise even as the economy experiences a notable slowdown.

The manufacturing and industrial production figures from the UK this morning showed another dip in December, with the latter in particular experiencing no year on year growth. Given that these are among the areas that have benefited since the referendum, it may be a minor concern. The pound dipped after the releases having failed to hold above 1.40 against the dollar in recent days.

GBPUSD Daily Chart

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.