Risk appetite has managed to stabilize overnight after a report in the FT suggested that China may start purchasing Italian debt. Sovereign debt markets have been in turmoil for a number of weeks now as the uncertainty about Greece’s ability to avoid default sparks contagion fears within the Eurozone. This China news, if true, would be a welcome balm to soothe frayed consumer sentiment and slow the mass sell-off that has defined the past few weeks’ trading.
In turn, equity markets have managed to halt the rout that plagued yesterday’s trading, with the Nikkei +0.95% on the day. The Shanghai Composite is -1.10% at the time of writing, but this is unsurprising as the index is having to play catch-up after missing yesterday’s sell-off due to the Chinese Mid-Autumn Festival holiday. Today the Hang Seng exchange is closed for a public holiday of its own.
In the FX space, EURUSD has managed to recover well off yesterday’s 1.3495 lows and is currently trading just below 1.3700 levels. This is despite fresh calls from German Chancellor Angela Merkel for Greece to meet its troika obligations.
Looking ahead, the data calendar includes the latest UK CPI figures where markets are expecting 0.6% MoM, 4.5% YoY increases to the headline measure, after last month’s 0.0%, 4.4% reading. We doubt that an upwards deviation will compel many people to start buying GBP particularly aggressively, as the BoE are clearly leaning towards the more dovish end of the spectrum given the current climate, and over 18 months of high inflation has failed to budge their stance on rates thus far. Perennial dove on the MPC, Adam Posen, is scheduled to speak later this afternoon but we doubt there will be anything new or surprising in his speech. Instead look for continued emphasis on the weak growth and heightened uncertainty arguments for UK monetary policy, and no doubt another plug for QE which he has been voting for in every BoE monetary policy meeting in recent memory.
By
M.Zohaib Gadit
Forex Trading Consultant
In turn, equity markets have managed to halt the rout that plagued yesterday’s trading, with the Nikkei +0.95% on the day. The Shanghai Composite is -1.10% at the time of writing, but this is unsurprising as the index is having to play catch-up after missing yesterday’s sell-off due to the Chinese Mid-Autumn Festival holiday. Today the Hang Seng exchange is closed for a public holiday of its own.
In the FX space, EURUSD has managed to recover well off yesterday’s 1.3495 lows and is currently trading just below 1.3700 levels. This is despite fresh calls from German Chancellor Angela Merkel for Greece to meet its troika obligations.
Looking ahead, the data calendar includes the latest UK CPI figures where markets are expecting 0.6% MoM, 4.5% YoY increases to the headline measure, after last month’s 0.0%, 4.4% reading. We doubt that an upwards deviation will compel many people to start buying GBP particularly aggressively, as the BoE are clearly leaning towards the more dovish end of the spectrum given the current climate, and over 18 months of high inflation has failed to budge their stance on rates thus far. Perennial dove on the MPC, Adam Posen, is scheduled to speak later this afternoon but we doubt there will be anything new or surprising in his speech. Instead look for continued emphasis on the weak growth and heightened uncertainty arguments for UK monetary policy, and no doubt another plug for QE which he has been voting for in every BoE monetary policy meeting in recent memory.
By
M.Zohaib Gadit
Forex Trading Consultant
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