Markets are skittish this morning, with traders fretting over the potential for contagion from the turmoil afflicting emerging market currencies. The Turkish Lira is at the epicentre of the trouble, but the Indian Rupee and Honk Kong dollar are under severe pressure. Money is flowing into the perceived safety of the US dollar, putting pressure on dollar pairs.
The EUR/USD is set to test the 1.1300 level and is under particular pressure due to its close exposure to Turkey, with the EUR/GBP looking set to reverse all of its early August gains. The EUR/CHF is stable this morning, but only after further losses yesterday as traders hunt out the stability of the Swiss franc.
The GBP/USD reversed yesterday’s early promise, slipping ever lower to test 1.2700. This comes following a drop in average earnings, but an improvement in the unemployment rate yesterday. The AUD/USD has slumped for five days this week. The USD/CHF has held up relatively well, remaining rangebound as trader balance off the two safe haven plays.
The USD/JPY is unchanged after gains yesterday in favour of the US dollar. Other yen pairs are following the general trend of lower prices, with the GBP/JPY and EUR/JPY lower and the AUD/JPY set for a test of 80.00.
Gold is slipping again, with $1180 the next likely test.
Today we have UK CPI at 09.30, released alongside RPI.
At 13.30, we have US retail sales and empire state manufacturing.
US crude oil inventories are at 15.30.
Slow wage growth in the UK is a persistent problem for the Bank of England and if yesterday’s numbers are anything to go by, UK interest rates could well take a less aggressive path.