Risk-aversion unsettles markets Risk-aversion unsettles markets Risk-aversion unsettles markets

Risk-aversion unsettles markets

Michael O’Neill

FX Trader, Loonieviews.net

There is a whiff of risk-aversion wafting around financial markets. The sell-off in the Argentinian peso, sparked when Argentinian officials asked the International Monetary Fund to speed up a payment, led to fresh losses in the Turkish lira. Lingering contagion fears due to European banks' exposure to Turkey depressed European equity markets. Traders are also a little nervous about the lack of progress in the China/US trade talks, believing that a successful Nafta negotiation will encourage the American’s to play “hardball.”

Wall Street traders are following Europe's lead. The three main indices opened with small losses but, to put it in perspective, they are occurring after a gain of 1.1% in the Dow Jones Industrial Average, since Monday. The S&P 500 and Nasdaq have performed similarly. There is also month-end noise to consider.

FX markets have gotten into the act and are buying US dollars. EURUSD dropped from 1.1694 at the New York open to 1.1655 as of 13:45 GMT. Even news that the European Union offered to cut tariffs on US cars didn’t help sentiment. US economic data have not been a factor this morning. 

Once again, the star of the FX show in New York is the Canadian dollar. Bearish USDCAD trades are being trashed. USDCAD soared to 1.2996 from 1.2925 with a break above 1.3005 extending losses to 1.3050. The catalyst for the rally was a weaker-than-expected Canada Q2 GDP gain of 2.9%, rather than the 3.0% that was forecast. Statistics Canada said “growth was mainly driven by a 2.9% increase in export volumes –the largest gain since the second quarter of 2014. Exports of goods, led by energy products, rose 3.6% after increasing 0.3% in the first quarter.”

Nevertheless, the report wasn’t strong enough to suggest a September 5 rate hike was likely.

The USDCAD rally was exaggerated because of the stretched short USDCAD positions which were set up in anticipation of a Nafta deal announcement. The prospect of a deal combined with reports of good-sized USDCAD selling for month-end portfolio rebalancing should limit USDCAD gains.

USDCAD (hourly, source: Saxo Bank)


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.