Market update: The Pound jumps after EU comments, emerging currencies in correction

11 Sep

by Mihály Tatár

 

Good Morning!

 

  • Trading started on a positive note on Monday, with especially European stocks bouncing (SPX +0.19%, Nasdaq +0.27%, Warsaw +0.46%, DAX +0.22%, Italian MIB +2.30%, Shanghai +0.17%), helped by Italy promising to be a good boy again and not breach EU rules (personally I suspect that this is either just talk to win time or part of a negotiation to ask for something big from the ECB and Brussels, or both), and by EU chief negotiator Barnier reassuring that a deal with the UK is still ’realistic’ and ’possible’ within 8 weeks. (By now, even diplomats talk about a ’Save May’ operation – anyhow, the Pound traders loved the news and the GBP jumped to 1.3050 against the Dollar, hoping that last week’s rumours were true and the EU worked out a face saving, ’starter agreement’ scheme instead of the unfixable conflicts of interests.) As expected, the ’not-in-critical-condition’ emerging currencies quietly strengthened (Brazil Real 4.085, Argentine Peso 37.35, EURHUF 324, EURPLN 4.312 – the inflation report from both countries will be interesting, mind you, Hungarian Y/Y inflation was as high as 3.4% in July, EURCZK 25.645 – by now not one but two rate hikes are expected, while the Chinese Yuan weakened further to 6.87 after the Trump Administration said it considered sanctions on Chinese officials and companies for the mass detention of ethnic Uighurs. If this indeed happens, most likely Chinese banks will be the next targets.) Oil trading has been quiet (WTI 67.60, Brent 77.50 USD), with US traders focusing on the ’so large no parallels exist’ Hurricane Florence while their European counterparts were watching the deadly attack on Libya’s National Oil Corp. – two were killed and 10 injured but security forces eventually retook its HQ building.) In other news, as widely expected, Pakistan invited the IMF for a staff level meeting (as before, ’no decision has been taken’ and Islamabad would clearly prefer the secretive Chinese bridge loans, but the external financing gap for this financial year already stands at 11 billion USD in a country where the forex reserves stand at 15 billion USD), and Turkey massed its military on the Syrian border including tanks, commandos and heavy artillery, to warn Syria and Russia ’to proceed cautiously’. (It’s not just that hundred thousands of refugees may flee into Turkey overhelming any infrastructure – Ankara also fears the Kurdish militias may take advantage of the unfolding chaos.)

 

 

Have a nice day,

Mihály

 

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