Markets:
Global core bonds gained ground today ahead of the weekend. A new sell-off in TRY caused safe haven flows ahead of the weekend, especially with Turkish markets closed next week for national holidays. EUR/TRY surged back above 7. European stock markets turned south, registering losses of up to 1%. Both the German Bund and the US Note future tested the intraweek highs. Traded volumes were extremely low though, probably amplifying the moves. The eco calendar was empty apart from a below-consensus August Univ. of Michigan consumer confidence which didn’t affect trading. The US yield curve bull flattens marginally at the time of writing with yields 0.8 bps (2-yr) to 1.2 bps (30-yr) lower. German yields drop by 0.9 bps to 2 bps with the belly of the curve outperforming the wings. 10-yr yield spread changes vs Germany widened by up to 3 bps with Greece underperforming (+7 bps). Next week’s eco calendar because somewhat more interesting with FOMC Minutes (Wednesday), EMU PMI’s (Thursday) and Fed Powell’s speech on the economy and monetary policy in Jackson Hole (Friday).
Recently improved risk sentiment convinced some investors to close some EUR/USD shorts ahead of the weekend pushing the pair above 1.14 in early European trade. The move proved to be premature with TRY back in the defensive ahead of European noon. EUR/USD reacted accordingly with the dollar taking over from the euro. The pair touched an intraday low of 1.1375. As TRY stabilized throughout the day, EUR/USD followed the move, gradually pushing the pair back towards 1.14. While EUR/USD showed more intraday volatility than other markets, moves remained limited and technically insignificant. Fortune won’t change in favor of the euro as long as the currency pair remains below the key 1.1510. The Japanese Yen fulfilled its traditional safe haven status, pulling USD/JPY back to 110.40. EUR/GBP followed the similar early move of EUR/USD higher and entered a technical sideway narrow range afterwards. EUR/GBP currently trades around 0.8960, compared to yesterday’s close around 0.8945.
News Headlines:
Canada’s year-on-year inflation rose to 3.0% in July, from a 2.5% rise in June, as energy prices ticked higher. The core inflation, CPI trim (YoY), also rose 2.1% against the 2.0% increase from June, supporting the Bank of Canada’s fourth rate hike in July. The Canadian dollar gained more than half a percentage on the news.
Germany is facing chronic labor shortages and wants to decide on a proposal to facilitate the process for skilled workers from outside the EU to take a job inside the country. In 2015, they hoped that more than a million refugees could fill the gap, but a lack of language skills and no proof of qualifications has slowed the process.
Slovenia has put an end to a two-month political deadlock as lawmakers approved election runner-up Marjan Sarec as new prime minister over the likes of election winner Janez Jansa, a populist and eurosceptic Victor Orban ally. The new minority government vowed to keep the country at the core of the European Union.
US President Donald Trump has announced that he asked the Securities and Exchange Commission to investigate a possible switch from quarterly reporting to a six month system, in order to ease regulations and spur growth for US businesses. Some corporate leaders and trade groups have stated that a short-term focus on earnings and revenues limits business to grow and create jobs.
