Major & minor currencies hit by volatility
Plenty to digest this week, and September looks like another volatile month for currencies
GBP: After expectations of a Brexit ‘showdown’ in the UK, GBP/USD fell to 1.1960 this morning – lowest levels since 2016. News that an application has been put forward for an emergency debate saw GBP recover, and GBP will remain the focus for currency markets. GBP/EUR at 1.1000 has been lower, but a weak EUR is preventing a further sharp fall.
EUR: The ECB this month is widely expected to table further measures to help the Eurozone recovery (more easing). Markets have priced in 60% chance of a 0.2% rate cut - re-inforced after yesterday’s poor PMI data release. Any measures are likely to hurt the shared currency, which at 1.0950 against the USD is looking fragile already – a 2yr low.
USD: Despite the fact that this weekend saw another round of US tariffs begin, the expectation of an ‘easing’ in trade tensions has helped the USD, which has seen continued strength this month. This is despite Trump’s call for a weaker USD and lower US interest rates. His comment last week that the USD was the strongest it has ever been is factually incorrect, but the currency maintains some decent momentum.
AUD: Interest rates were left unchanged, but more importantly the central bank struck a positive tone on the economy, and AUD gained strength, going through the 0.6700 level against the USD. This positive outlook, and the central bank’s ‘wait and see’ stance could help in the medium term.
INR: the Indian rupiah fell sharply through the crucial 72 per USD mark. Hurt by weak GDP data, outflows from a falling stock market and broad USD strength, the slowing global economy and domestic slowdown is beginning to hurt the broader Indian economy.
ZAR: Stronger, after decent GDP numbers today, and sent USD/ZAR to 15.00. The data reversed poor figures from Q1 2019, suggesting the economy has some resilience left.
This Reuters article gives a good breakdown:
https://www.reuters.com/article/us-global-markets/global-stocks-stumble-toward-two-month-lows-as-u-s-data-looms-idUSKCN1VO01L