Morning Commentary: A New Week – More of the Same

Foreign Exchange - Morning Commentary

A New Week – More of the Same

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Alan Rose
Alan Rose
Foreign Exchange Head Trader
The markets are beginning this new week right where we left off from last week - extremely fearful. There are so many issues creating uncertainty that are roiling the markets and at the same time creating extreme volatility and whip-saw price action that these issues are continuing to send investors and traders into cash or to the sidelines. Exacerbated trade tensions between the two biggest economies in the world combined now with the political repercussions of the arrest of the CFO of Huawei Technology from China have added another tension point for the markets.
Markets were in another deep dive in Asia on headlines that China had summoned both the U.S. and Canadian Ambassadors and were fearful of increased tensions and cessation of trade talks between the U.S and China. European markets followed suit, but for whatever reasons bottomed, and have been clawing their way back from extreme lows. At the moment, European stocks remain slightly in the red, G7 interest rates are mixed after being much lower in yield, commodity prices remain weak, and the DXY has regained its footing after being much lower.
This week will be another turbulent week for the markets as we see no end in sight to the uncertainty creating so many headwinds for the market. Looking at currencies, the DXY remains generally trapped as all the attention for now is focused on equities and interest rates. The British pound (GBP) is the weakest major currency today and the GBP is making new yearly lows; weak economic data today combined with heightened uncertainty about a Brexit vote this week and PM May’s standing have all put pressure on the GBP this morning. Continue to expect the unexpected, and importers and exporters should remain tactical.
  • India’s central bank governor, Urjit Patel, unexpectedly resigned amid public clashes with the government as the government sought greater supervision of the functioning of the Reserve Bank of India. The Indian rupee has depreciated by nearly 0.75% against the U.S. dollar.
  • The U.K. reported a much wider trade deficit for October and a much weaker industrial production number for October at -0.6% against expectations for a gain of 0.1%. U.K. interest rate yields are much lower.
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