It was another mixed day across markets yesterday which probably represents the level of uncertainty on a number of issues that investors are craving confirmation on. We saw a decent rally in some of the currencies as at last we heard some positive trade news from the US on Chinese trade, with confirmed reports that Treasury Secretary Steven Mnuchin has approached China to restart talks on trade and tariffs. Emerging markets gained a bit of a respite on the news and the majors all had positive moves against the greenback with Aussie and Kiwi in particular pulling back from recent lows, the momentum was helped along by a downside print in the US PPI data. The stock markets weren’t as positive in the US, finishing the day close to flat and of course the jury is still out on whether this is yet another negotiating tactic, especially after the last comments that we’d had from the Oval office on the situation.
Yesterday may be seen as the calm before the storm both literally and figuratively as we have a plethora of risk events ahead of us today as well as the expected landfall of Hurricane Florence in the US South East coast. We have two major central bank announcements due later today and with no change expected from either the ECB or the BOE, market focus will be firmly on the statements and press conferences. Oil moved higher again as the storm front moved closer to land and US Crude inventories tightened further.
The biggest potential for currency movement however, probably comes from another central bank decision a bit further East. The Turkish central bank rate is due today as well and analysts are looking for a substantial hike (300 bps+) after inflation increased to 18% in August and the currency crashed. Volatility in the currency is almost guaranteed today with the central bank attempting to bring economic stability on one hand whilst trying to manage political expectation on the other. Given recent moves in the Try, any disappointment for the market could see a resumption of the downside move and threaten the August low in short order.
First up today though we have the latest employment data due out of Australia with an expected extra 16k being added to the work force and the Unemployment rate remaining at 5.3%. The Aussie experienced a bit of a relief rally last night and a strong number could help it gain further, any disappointment could once again see it revisit recent lows. It’s quiet for the rest of the Asian session but as indicated above we have the potential for volatility as we move into the London and New York sessions. We have US CPI data due out early in the North American session and this is set to coincide with the start of the ECB press conference which should keep EurUsd traders on their toes. We’re also due to hear from Fed members Bostic and Quarles later in the day which could also affect the dollar and rates markets with rate hike expectations already pushing higher this week.