- Stock markets bounce back
- Risk aversion moves currency markets
- Sterling suffers from further Brexit troubles
By Charlie Horsley
Stock markets bounce back
Global stock markets are staging a comeback following the wild swings this week that have marked a return of volatility to equity trading after years of unusual calm. The focus for many investors during the rollercoaster day on Tuesday remained on the Vix Volatility Index, Wall Street’s so-called “fear gauge” or “risk index”, which briefly shot to its highest level since the 2015 Chinese currency devaluation. And the fourth highest ever.
Risk aversion moves currency markets
Currency wise, we saw some risk aversion, which caused the US Dollar to strengthen – often viewed as a “safe haven currency” in times of uncertainty like this – and perceived riskier currencies like the Mexican Peso fell. The focus of markets and investors will remain on US stocks, which were the source of the latest turbulence in global markets and currencies. The Dow has rebounded somewhat, although it remains to be seen if the recent move was a healthy correction or the beginning of a Bear market.
Sterling suffers from further Brexit troubles
The Pound is on the back foot as the European Union (EU) toughens up its Brexit demands. The UK may have to pay a higher bill than previously thought and the EU is insistent on the UK having less say on decisions. Sterling has lost some ground versus the Euro as a result and is trading at the lower end of the recent range. The Euro has strengthened on the back of some solid data from Germany, as factory orders rose a stellar 3.8%; however, the Euro will probably remain trading in a tight range against its key currency pairings until the political situation in Germany is resolved.
Little data on the cards for today
The economic calendar is light today. German Industrial Production and Swiss Foreign Currency Reserves will be released in European session. Canada will release Building Permits later in the day.
If you are concerned about the recent volatility and ongoing political uncertainty, call your Halo Currency Consultant
to discuss how this may affect you.