UK Pound Sterling, US Dollar and EUR single currency commentary provided by Argentex:
Today is the third consecutive day of no economic releases from the UK, which puts GBP way in the back seat, possibly even in the boot as far as currency drivers are concerned. The Jackson Hole Symposium will be dominated by Greece and China, so tomorrow is effectively another non-UK day, and Friday sees the second estimate of last quarter’s GDP. Combined with the low volumes we normally expect to see in August, the pound has been buffeted around a fair bit, gaining against the dollar but falling against the euro quite significantly – if we look at EURUSD which has managed a convincing consolidation into higher ranges, this belies the fact that the move in sterling is anything but sterling led and instead primarily as a result of euro strength and some mild dollar weakness. We are yet to see any significant flight to safety into the traditional safe haven of the dollar, but if this turmoil continues for much longer we’d expect the dollar to benefit as a result, although there are arguments that with the UK on the verge of raising rates the pound could act as a safe haven also.
Equities remain amazingly volatile, driven by wild swings in China, where the first two hours of trading this morning saw a trading range of 5.1% in the Shanghai Composite Index. The PBOC stepped in and cut rates to boost confidence, the fifth cut since November. US stocks were similarly volatile, ending yesterday’s session in the red, giving up all the gains it looked like they were going to make early in the afternoon. Volatility breeds uncertainty, and vice versa, which feeds through into the currency markets in the form of wide spreads and jittery trading, exacerbated by seasonally low volumes. Credit Suisse, Danske and UOB are all betting on GBPUSD rising to near-1.60 levels in the short term, while Danske (yes they’ve got positions both sides) and Credit Agricole have targets of 1.50 or lower. Danske having short term trades in both directions is indicative of the degree of uncertainty in the markets at the moment. Credit Suisse and Citi both think 1.20 or thereabouts is on the cards for EURUSD. FOMC member Dudley is speaking this afternoon, and tomorrow sees the start of the Jackson Hole Symposium as well as the release of latest GDP data from the US.
After the euro’s very explicit agreement with the resignation of Tsipras, as a result of expectation that he will again be elected but without the rebels leading to a stronger political position, the euro has joined the pound in being thrown around by the wider geopolitical and economic headwinds. Fundamentally the Eurozone is in the middle of an easing cycle, and so it is difficult to see much more upside for the single currency against regions where interest rate rises are imminent like the US and UK. Then again, the euro is anything but logical.
Telegraph – Panic selling returns to fragile markets.
Independent – Recruiters look for mini-me’s (sic) when hiring.
FT – China turmoil boosts UK allure.