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While the S&P 500 managed to avert four straight down days with modest gains on yesterday’s session, the sharp reversal in sentiment late in trading had strong implications for risk appetite, as the rout in high-yield continues this morning with equity futures collapsing.   Another confirmed case of Ebola in Texas combined with comments from Japanese officials on an exit from QE have been two of the catalysts for another flush in equity positions, though sentiment on the back of yesterday’s rebound didn’t feel sufficiently solid to begin with.   The Japanese Yen is finding a moderate bid tone after the BoJ’s former chief economist stated the central bank should begin to pare back some of its stimulus and look for an exit plan to normalize monetary policy, or risk hurting consumers with higher inflation when employment and growth remain stagnant.   USDJPY has slipped through the 107 handle to the downside in early North American trading, while the Nikkei managed to stage a slight rebound to a gain of 0.92% on its session.

The European session is witnessing another round of sharp losses for equity indices as investors seek out safety of fixed income on the back of soured risk appetite, though both the Euro and Pound have been able to find some solid ground against the greenback.   GBPUSD busting through the 1.60 handle to the downside during yesterday’s session was significant from a technical perspective, though the pair has generated a slight bid tone on the back of employment data that was modestly positive.   The Claimant Count change for September came in worse than expected with a drop of only 18.6k, though this was mitigated by a fall in the unemployment rate over the month of August to 6.0%, with wage growth (excluding bonuses) picking up to 0.9% over the same period from the previous print of 0.8%.   The encouraging employment data after yesterday’s soft inflation statistics have helped cauterize some of the Pound’s bleeding, with the bounce extending after the release of damp economic data in the US.   MPC rate hawk Weale is speaking later today and has the potential to help the rebound in the Pound with positive rhetoric towards a tightening of policy in the UK, although at this point he is still in the minority of the Committee.

As we get set for the North American open, retail sales for the American economy over the month of September were just released, missing expectations across the board as consumers pared back purchases after the back-to-school season.   The headline reading was expected to print slightly soggy, yet the 0.3% decline outplaced the 0.1% drop that had been forecast, with the retail control group also slipping by 0.2% after a 0.4% increase in August.   The negative consumer spending print has pushed the greenback lower against most of the majors, though equity markets have yet to see this as a potential positive for accommodative policy, with futures have taking another leg lower on the news, as bonds remain bid and the 10-year US treasury yield falls to 2.05%.   While the USD is paring some of yesterday’s gains, commodity-correlated currencies like the CAD and NOK are still stinging as oil prices remain heavy.   Unable to find a bottom, WTI has cracked below the $81 handle while Brent is struggling to hold $84, with the lack of bid-tone helping propel USDCAD to five-year highs, though the pair has settled back into the low-1.13s after the US retail sales data.

Ffurther reading:

USD flash crashes: moves of more than 100 pips in both directions

Dollar sell off – levels to watch in EUR, GBP, JPY, CAD, AUD, NZD