Analysts at TD Securities explained that global risk sentiment continues to hinge on the ongoing currency crisis in Turkey, with USD/TRY up another 8% from Friday’s close.
Key Quotes:
“North American equities (SPX: -0.3%, TSX: -0.4%) followed European stocks lower while Treasuries and Canadian rates saw a quiet start to the week, with little change in yields on either side of the border.
The USD saw a broad-based rally against G10 FX, though gains were relatively muted with the DXY looking toppish.
JPY (+0.2%) continues to fare well in the soft risk environment while AUD (-0.5%) came under pressure ahead of today’s business confidence data.
Chinese IP and retail sales will provide the local data highlights before a number of important releases in the European session.
We monitor signs of spillover effect and potential signs of capitulation in EURUSD; 1.1310 appears to be notable support and 1.1450 as key resistance.
We are closely watching EUR/JPY for guidance for broader EUR direction, as the JPY has begun to diverge from the ADXY and appears to offer greater “safe haven” appeal than its current account surplus peer. Rallies towards 110.80/111.00 are likely to be faded in USD/JPY with the 200-dma near 109.95 as a crucial pivot.
Treasuries will continue to watch the Turkish drama unfold ahead of retail sales data later in the week. We continue to expect 5s30s flatteners, but EM risks could create a near-term steepening.”
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