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Rollercoaster ride for global markets

Published: Wednesday 07 February 2018

  • 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.
Wednesday wisdom

“People don’t notice whether it’s winter or summer if they’re happy.” – Anton Chekov
“Wisdom is often nearer when we stoop than when we soar.” – William Wordsworth
“Honesty is the first chapter in the Book of Wisdom.” – Thomas Jefferson
“All around us, power balances are shifting. 2016 and 2017 were years of similar inversions.” – Jeremy Vine

Today's Major Economic Releases

Market BST Data/Event Previous Expected
CAD 13:30 Canada: Building Permits -7.7% 2.1%
USD 15:30 US: Crude Oil Inventories 6.8m 3.2m
NZD 20:00 Reserve Bank of New Zealand Official Cash Rate 1.75% 1.75%
NZD 20:00 Reserve Bank of New Zealand Rate Statement    
NZD 20:00 Reserve Bank of New Zealand Monetary Policy Statement    
NZD 21:00 Reserve Bank of New Zealand Press Conference    

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news