ETHICAL CURRENCY DAILY BRIEF

 

 

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Daily Brief - 19/10/2017

London Office

 

British Pound

 

Reuters: The pound slid to a five-day low on Tuesday after comments by Bank of England policymakers were interpreted by markets as dovish, despite new September inflation data being in line with expectations. The British currency is currently at $1.3175, its lowest point since October 9. “The labour market figures this morning will be closely monitored in the absence of any clear assistance from the CPI (inflation data),” Craig Erlam, a senior market analyst at OANDA, wrote in a note. “Negative earnings growth is one of the factors that is likely to weigh on the economy going forward and makes the BoE’s decision on interest rates all the more difficult,” he said.

 

Members of the Bank of England’s interest rate-setting committee were speaking on Tuesday to parliament’s Treasury Committee. Silvana Tenreyro, external member of the BoE’s Monetary Policy Committee, said upward pressure on inflation from sterling weakness will start to wane in the coming months. Official data on Tuesday showed Britain’s inflation rate hit 3 percent, above the central bank’s 2 percent target but in line with expectations. Some strategists argued that even a lack of unanimity at the Bank of England would not alter the likelihood of a rate rise. “The markets have already priced the rate hike in and it would probably take a significant disappointment in today’s wages and u

 

US Dollar

 

Reuters: The dollar hit its highest in about two weeks against the yen on Thursday, supported by this week’s rise in U.S. bond yields, with the market’s attention turning to who will next lead the Federal Reserve and this weekend’s Japanese election. The dollar index, which tracks the U.S. currency against a basket of six major rivals, was slightly higher on the day at 93.389 .DXY. The dollar rose as high as 113.095 yen JPY= in early Asian trade, its strongest level since Oct. 6. The dollar last changed hands at 112.97 yen, steady from late U.S. trade on Wednesday.

 

This week’s rise in U.S. bond yields helped lend support to the greenback. The two-year U.S. Treasury yield US2YT=RR rose to its highest since November 2008 on Wednesday on the back of expectations for tighter global monetary policy. The benchmark U.S. 10-year Treasury yield Utouched a one-week high of 2.352 percent on Wednesday, and last stood at 2.342 percent, having risen six basis points so far this week. “In order for expectations of tighter U.S. monetary policy to increase, we will need to see more evidence to confirm that U.S. inflation is rising,” said Kumiko Ishikawa, FX analyst at Sony Financial Holdings in Tokyo. The dollar’s rise against the yen was likely to be capped by uncertainty ahead of this weekend’s election in Japan.

 

South African Rand

 

BD Live: The rand was trading at R13.57/$ at 6.30am on Thursday, taking its slide to more than 2% since President Jacob Zuma reshuffled his Cabinet on Tuesday. The rand was at R16.01/€ and R17.93/£. The weakening rand boosted the shares of geographically diversified companies, with Anheuser-Busch InBev rising 1.9% to R1,712.60 and British American Tobacco rising 0.64% to R870. Stats SA reported August’s retail sales growth was 5.5% — far higher than economists’ consensus of 2.3% — which buoyed the JSE’s general retailers index by 0.87%.

 

It was led higher by fashion chain Truworths International’s 3.17% rise to R78.14, followed by The Foschini Group’s 1.73% to R140.84 and Massmart’s 1.48% to R115.76. "It is possible that the August retail sales dynamics to an extent reflect the effects of the 25 basis point interest rate cut in July and the slower rate of inflation. Lower base factors also contributed to lifting the annual growth outcomes," Investec Bank economist Kamilla Kaplan wrote in an e-mailed note. The Dow Jones industrial average rose 0.7% to clock 23,000 points for the first time, but Wall Street’s other two main indices — the S&P 500 and Nasdaq — were flat on Wednesday.

 

The composite indices of mainland China’s Shenzhen and Shanghai stock exchanges were both down more than 0.3% and Hong Kong’s Hang Seng index was down 0.1% ahead of the JSE’s opening. China’s September quarter GDP growth was reported at 6.8% from the same quarter in 2016. This matched the economists’ consensus, but marked a slowdown from the second quarter’s 6.9%. The slowdown of the Chinese economy saw Sydney’s S&P/ASX 200 index fall slightly, and is likely to cause the JSE’s miners to suffer for a third day. Despite the weakening rand, the JSE’s resource 10 index fell 0.23% on Wednesday and 0.48% on Tuesday.

 

Australian Dollar

 

Reuters: The Australian dollar edged higher after Australian jobs data for September came in stronger than expected. The Australian dollar rose 0.1 percent to $0.7850 AUD=D3, pulling away from Wednesday's intraday low of $0.7819.

 

Against the yen, the Australian dollar rose to 88.87 yen at one point, its highest level since late September. Economic data from China was largely in line with expectations. The Australian currency is sensitive to China developments because of the two countries’ massive trade relations.

Daily Brief - 19/10/2017

Hong Kong Office

 

British Pound

 

FXStreet: Sterling dropped to a low of 1.3140 before reversing to the settle the day much closer to its highs than lows. While wage growth was stronger than expected, investors did not feel that the overall report was positive enough to offset the doubt caused by yesterday's comments from MPC officials. Jobless claims ticked up slightly but the unemployment rate remained unchanged and most importantly wage growth was revised up to 2.2% in July and remained at that pace in August. 


Retail sales are due for release tomorrow and this increase along with the uptick in spending reported by the British Retail Consortium suggests that spending may not have fallen in September like economists expect. Unfortunately, even if the report beats expectations, as we have seen today, Brexit and BoE concerns could prevent sterling from enjoying a meaningful rally. However on technical basis it appears to be due for one with today's slide finding support right at the 50-day SMA.

 

US Dollar

 

Reuters: The dollar hit its highest in about two weeks versus the yen on Thursday, supported by this week’s rise in U.S. bond yields, with the near-term focus on U.S. President Donald Trump’s decision on the next chair of the Federal Reserve. 


The dollar rose to as high as 113.095 yen in early Asian trade, its strongest level since Oct. 6. The dollar last changed hands at 112.92 yen, steady from late U.S. trade on Wednesday. This week’s rise in U.S. bond yields have helped lend support to the greenback. The two-year U.S. Treasury yield rose to their highest since November 2008 on Wednesday on the back of expectations for tighter global monetary policy.


The euro edged up 0.2 percent to $1.1810. One focus for the euro is the European Central Bank's policy meeting coming up next week. The Australian dollar rose 0.2 percent to $0.7865, pulling away from Wednesday's intraday low of $0.7819. Against the yen, the Australian dollar rose to 88.87 yen at one point, its highest level since late September.

 

Chinese Yuan

 

Reuters: China is expected on Thursday to post a modest slowdown in third quarter economic growth from the previous quarter as the government’s efforts to rein in the property market and debt risks weigh on activity in the world’s second-largest economy. 


Analysts polled by Reuters expect gross domestic product (GDP) to have grown 6.8 percent in the July-September period, cooling from the previous quarter’s 6.9 percent expansion. China’s property investment and construction are seen slowing as more cities try to curb surging housing prices, while a government campaign against riskier lending pushes up borrowing costs and a crackdown on pollution hurt some factories. 


A better-than-expected GDP reading would likely lift stocks and global commodity prices and boost bullish sentiment on the yuan, which has gained about5 percent against the dollar so far this year. Economists in the poll estimated GDP grew 1.7 percent quarter-on-quarter, unchanged from the second-quarter, though only 18 analysts gave sequential forecasts. 

 

Global Markets

 

Reuters: Asian stocks inched up to near decade highs on Thursday, continuing to ride on a global equities rally, while the dollar resumed its rise on the back of a spike in U.S. yields. Trade was cautious, however, as investors waited for third-quarter economic growth data from China at 0200 GMT, which is expected to show its momentum is starting to cool as the government reins in the property market and cracks down on riskier lending. 


MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.05 percent, nearing a 10-year peak scaled on Tuesday. Japan's Nikkei rose 0.4 percent to a fresh 21-year high, while South Korea's KOSPI, on a record breaking tear for the past week, nudged up to an historical high and Australian stocks added 0.3 percent. 


In commodities, Brent crude oil futures was 0.2 percent higher at $58.24 per barrel. Brent had risen to a three-week high of $58.54 a barrel on Wednesday on worries about tensions in Iraq and Iran but lost steam after a surprising drop in U.S. refining rates and an unexpected build in fuel stocks signaled slower demand in the world’s top oil consumer.