Daily Roundup – Markets review
Currency markets have proved somewhat resilient overnight despite a potent combination of mounting geopolitical tensions and enthusiasm over the prospects for an orderly Brexit. During yesterday’s session, despite an inherent bias towards safe haven currencies, Sterling managed to continue pushing out to fresh highs as the idea of a no-deal Brexit diminished further, underlining just how beaten down the currency has been in recent months.
The Yen found some favour at the tail end of the Asian session after the US/North Korean summit broke up earlier than had been expected, although a conciliatory tone form Donald Trump seemed sufficient to allay the majority of fears. The Yen is already being buoyed by escalating geopolitical tensions elsewhere, especially between India and Pakistan so this will likely maintain the bias here, but the market has felt little need to price in the North Korean news differently.
Murmurs of a lack of progress in the China-US trade talks also appears to be causing little concern right now, with the Aussie dollar holding broadly stable through the Asian session. As noted yesterday, rate outlooks convey a downside bias for AUD in the longer term, although any shocks in today’s US GDP print could provide some fresh support for the Aussie. This does however seem unlikely given Jerome Powell’s recent appearance before lawmakers that gave no real cause for alarm.
German inflation data at 1pm GMT today and the pan-Eurozone prints tomorrow morning have the potential to rattle the common currency if there are meaningful shortfalls here. There can be little doubt that the Eurozone economy is slowing but any arrest in inflation will put pressure on the ECB to disclose its hand when it comes to stimulus measures. The lack of support for EUR/USD even though a no-deal Brexit seems set to be avoided is arguably testament to the common currency’s perceived weakness right now and volatility could well be seen here in the coming days.
GBP/NZD has broken above the 200 day moving average, providing scope for further support. With the 50 day MA eyeing a break above the 200 day MA as well, this provides evidence of scope for further gains.