Selling Britain by the pound
Forex traders are no more impressed by UK PM Theresa May's latest efforts than were the leaders of the European Union, and sterling is on track to take the 'week's worst performer' title away from a languishing loonie.
Asian equities took a dive into the deep end overnight, ahead of this weekend’s G7 meeting (which The Donald will not attend) and, more importantly, his crunch summit with the North Korean dictator next week.
“All signs point to Trump inserting foot in mouth and generally not making friends with traditional US allies, so it’ll be interesting to see the headlines that come out of that,” says John J Hardy, Saxo’s Head of Forex Strategy.
But whatever embarrassments may await world leaders in Toronto, equities have already suffered the indignity of steep declines: “The biggest carnage was in Asia, with Tencent, for example, down 3%” says Peter Garnry, Saxo’s Head of Equity Strategy. Such falls came despite a noticeable absence of specific triggers. “The only thing that has happened in the past 24 hours is the downturn in G7 rhetoric,” he says.
And as risk appetite soured in equity markets, we saw the mirror image of this development in forex where the US dollar and the Japanese yen firmed, especially versus the smaller and traditionally risk-correlated G10 currencies and those from emerging markets too, Hardy says.
This EM space continues to be plagued by volatility: “We’ve seen the Brazilian real continue to worsen with the central bank not really shoring up confidence yesterday, but merely saying it would consider using reserves and didn’t want an emergency meeting as Turkey did when it hiked recently”.