Emerging markets currencies slipped again during yesterdays trading and we saw some of the global growth concerns spill over into other markets with the stock markets having a bad day across most of the globe. Argentina and Turkey have seen serious depreciation on their currencies over the last few months and other EM currencies have been under pressure in general. Yesterday it was Indonesia’s turn to take a hit as the Idr dropped again against the greenback to trade towards historic lows not seen since the 1998 Asian crisis, add to this South Africa entering a recession and you can see why contagion fears are starting to grow.
The dollar gained across the board led by haven flows as trade concerns once again influenced investor sentiment, the Cad took another hit as President Trump reinforced his stance that Nafta can go ahead without Canada despite congressional opposition. A stronger print for the US ISM Manufacturing PMI also helped the greenback drive to the topside and the Dxy is trading back around 95.50 as we enter the Asian session.
The Aussie dollar had another busy day with the RBA delivering a more positive rate statement than expected by the market, we saw a bit of a relief rally post the announcement but normal service to the downside resumed as the London market entered the fray. We’ve got the GDP numbers due out today and expectation is for a slight slowing with a 0.7% print for the QoQ data and 2.9% for the year. Aussie is once again sitting near recent lows this morning and a big miss to the downside could see the move extended down towards 0.7100. However the market is short and anything on expectation or better will see another intra day rally that will give the numerous bears better levels to sell into.
Event risk starts to heat up today as we move through the trading sessions, the main focus during the London time zone will the Services PMI data and investors will be turning their attention to Canada as the New York day opens. Not only are Nafta negotiations between the US and Canada about to re start today, but we have Trade balance due north of the border and then the small matter of the latest Bank of Canada rate announcement and statement. We’re not expecting any move on the rate level but the statement should prove interesting reading and the combination of data and news flow event risk should see good volatility in the Loonie and Cad crosses.