Overall, the lackluster session of trade on Thursday was somewhat to be expected and unsurprising given the violent moves seen on Wednesday. The currency markets seemed content on pausing for a breather to take more time to digest the severity of the latest wave of risk aversion before making any additional decisions on direction.

Data out of the US was once again on the soft side with initial jobless claims coming in higher and import prices on the lower end. US equities could not manage any form of recovery and ended up closing lower on the day with the DJIA down 0.57%. On the commodity front, price action was pretty much consistent with expectation, as oil prices continued to deteriorate, while gold managed to catch a bid, rallying sharply in reaction to the broad based safe haven flows. Interestingly, safe haven currencies all responded quite differently on Thursday, with the US Dollar exchange rates mostly sideways, the Yen depreciating, and Swiss Franc Buying causing it to rally quite sharply.

Meanwhile, Sterling was a gross underperformer, while Australian Dollars and New Zealand Dollars rates also remained well offered on rallies. Kiwi has however managed to outperform in Asian Trade on Friday following a stellar retail sales print which came in well above expectation to easily offset any disappointment from the softer REINZ house price index. Nevertheless, and rallies in Kiwi should be used as an opportunity to look to sell the antipodean in the current market environment, which is clearly more heavily influenced by broader global macro uncertainty. Finally, the Canadian Dollar was off doing its own thing, to erase some of the Wednesday’s US Dollar rates gains. In the end, price action was consolidative and it looks as though we will need to see how things play out on Friday to get some more colour.

Technically, weekly price action warns of a meaningful bottom for the US Dollar rates, and as things have played out to this point, this would suggest that the latest wave of risk aversion is here to stay for a while longer. As such, we would look for continued USD appreciation against all major currencies, with the exception of the Yen which retains a strong bid tone for the time being. Looking ahead, to European trade, German GDP (1.3% expected) is due at 6:00GMT, followed by Swiss producer and import prices (-0.2% expected) at 7:15GMT. Eurozone GDP (0.7% expected) and trade balance (1.0B expected) cap things off at 9:00GMT ahead of the North American open.

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Bye for Now

 

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