Keep an eye on CNY
Turkish assets and the TRY are stabilising but the Chinese yuan is again climbing towards the key 7.00 area, placing the Sino-US trade war and general EM concerns in focus.
The US dollar reigns supreme across the board, with the recent worries about trade wars apparently being shrugged off amid stable to higher US yields and strong risk appetite in major equity markets, says John J Hardy, Saxo's Head of FX Strategy. "This environment is generally supporting the dollar and USDJPY has bounced back higher," he says. Although new GDP numbers from New Zealand matched market expectations, the kiwi has joined its Australian and Canadian peers by weakening to new lows versus the mighty USD. Other beleaguered currencies include those of emerging markets which are under increasing pressure because of the greenback's strength, country-specific political hurdles and the fact that many of them carry heavy loads of dollar-denominated debt.
Equities in developed markets are continuing their run higher while those in the EM space are mixed, with Brazilian banks a rare overachiever having posted gains of 7%-8%, reports Peter Garnry, Saxo's Head of Equity Strategy. That said, a long list of casualties elsewhere include South Korean stocks (the worst-performing equity market since the trade war started) as well as Germany's Daimler (owner of Mercedes-Benz) whose SUV models sales are taking a hit from Chinese tariffs.
In commodities, gold and metals are generally trading lower in response to the rising dollar and higher yields after Fed chief Jay Powell confirmed the outlook to higher US interest rates, says Ole Hansen, Saxo's Head of Commodity Strategy. "The developing trade war is likely to weigh on business confidence and could force central banks to downgrade their outlooks," Hansen adds.
Finally, the much awaited Opec and no-Opec series of meetings in Vienna continue to capture headlines with the latest news being that the cartel
seems to moving towards an agreement to raise crude oil production in order to replace lost barrels from Venezuela and others, Hansen concludes.