Yen and Dollar are trading as the weakest two today. On the other hand, Sterling and Euro are the strongest ones, with Australian Dollar trailing behind. There are a couple of underlying themes today which triggered much volatility.
Firstly, the story of restarting US-China trade negotiation continued to develop. White House economic advisor confirmed yesterday after the bell that there was an invitation to China for trade talks. China also confirmed they received that invitation and both sides are already in discussion on details of the meeting. China SSE ended up 1.15% at 2686.58 today even though it failed to reclaim 2700 handle. Australian was originally the biggest gainer as also helped by strong employment data. However, later in the US session Trump tweeted that China is the one who’s under pressure to make a deal. And “we will soon be taking in Billions in Tariffs & making products at home.” Apparently, he’s trying to re-escalate the tension. That’s a main factor knocking Aussie down against Euro and Sterling.
Secondly, Turkish central bank CBRT delivered a massive rate hike, by lifting the policy rate from 17.75% to 24%. That triggered a strong rebound in the Lira, with USD/JPY now trading down around -4%. It also eased worries of re-emergence of Lira crisis and contagion to Europe. That’s a strong factor supporting Euro and to a certain extent Sterling.
Thirdly, US core CPI came in weaker than expected, slowed to 2.2% yoy in August, down from 2.4% yoy. While that shouldn’t stop the Fed from raising interest rate to neutral, it could start casting doubts on whether Fed should continue beyond neutral. The data helped supported US equities and pushed USD/JPY through 111.82 resistance.
BoE and ECB rate decisions are indeed shrugged off by the markets. Here are some readings on ECB and BoE:
- ECB Review: For the Feinschmeckers – Part II
- Bank of England Review: Repeats Hiking Bias amid Brexit Uncertainties
In other markets, DOW is currently up 0.48%, S&P 500 up 0.54%, NASDAQ up 0.96%. FTSE closed down -0.43%, DAX up 0.19% and CAC down -0.08%. Gold hit as high as 1212.64 earlier today but is now down back at 1204 after failing to take out 1214.3 resistance.
