Trading news

Emerging market sell-off, GBP slides further

- Sterling may continue its sell-off against the USD as uncertainty surrounding Brexit climbed another notch

- We are having hard time feeling bullish on the sterling with no visibility on what lies ahead

- We feel the pound may be oversold are investors cannot rely on any historical benchmark

- Emerging market currencies suffered a substantial sell-off yesterday as market participants were less prone to load on more risk

- NZD/USD is now heading towards 0.7165 as markets have begun pricing in another rate cut from the RBNZ


Emerging market currencies suffered a substantial sell-off yesterday as market participants were less prone to load on more risk. The sell-off in the Brazilian real was also strengthened by the weak industrial output. Industrial production widely missed consensus, contracting 5.2%y/y in August (versus -4.8% expected) after shrinking 6.4% in the previous month. The Brazilian real slid 1.47% against the US dollar yesterday and returned to around 3.2580. The Colombian peso was also under pressure on Tuesday as it slid 1.52% versus the US dollar amid broad risk-off sentiment.


Precious metals recovered somewhat this morning after slumping massively. The yellow metal fell 3.30% from $1,310.50 to $1,267.10 amid speculation that central banks are about to tighten their respective monetary policy conditions. Silver also took a big hit as it slid almost 6% to 17.80 before getting some ground back and returning to around $18. This morning, palladium and platinum were up 0.10% and 0.65% respectively.


The New Zealand dollar was the worst performer amongst the G10 complex falling 0.49% against the greenback, down to $0.7176, the lowest level since August. NZD/USD clearly broke the 0.7222 support to the downside and is now heading towards the following one that stands at around 0.7165. The recent debasement of the Kiwi is mainly due to the fact that market participants have been starting to price in another rate cut from the RBNZ, forcing yield chasers to look for another ways to generate return. If the latter support is broken, the following support lies at 0.7088 (low from August 8th), then the road is wide open towards $0.70.


The pound sterling traded sideways during the Asian session before suffering a mini sell-off in the early European one. GBP slid another 0.30% against the dollar, down to 1.2691, as the uncertainty surrounding the Brexit story climbed another notch. We are having a hard time feeling bullish on the sterling with no visibility on what lies ahead. However, we also have the feeling that the pound is being over sold as investors are lost in the dark without any historical benchmark of such a situation.


Today traders will be watching Services and Composite PMIs from Spain, the Euro zone, France, Germany, the UK, Brazil and the US; ADP employment change, MBA mortgage application, trade balance, factory orders, durable goods orders and crude oil inventories from the US.

Wednesday, 05 Oct, 2016 / 8:48

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