Market Turmoil and USD Dominance Continues Amidst a Geo-Political Storm

Earlier in the Day:

There were no major stats released through the Asian session this morning to provide direction for the markets, with geo-political risk was left to dictate market sentiment and direction for the major pairings through the session, with China new loan and FDI numbers not due out until the tail end of the Asian session.

Through the early part of the morning, the Turkish Lira was down another 1.92% to 6.9585 against the Dollar, the continued slide gripping the global financial markets at a sensitive time, where an ongoing trade war with China, fresh sanctions on Iran and new sanctions on Russia are already testing market resolve.

At the time of writing, the Japanese Yen was up 0.60% to ¥110.16 against the Dollar and up 0.92% to ¥125.35 against the EUR, as concerns over the effects of a Turkey financial crisis on the Eurozone and, European banks in particularly, weighed early.

Demand for U.S Dollar was also evident, with the Aussie Dollar sliding 0.45% to $0.7269, tumbling commodity prices adding further pressure on the Aussie that is at $0.72 levels for the first time since the beginning of the year.

For the Kiwi Dollar, things were a little better, the Kiwi down just 0.06% to $0.6586, last week’s beating providing some sympathy at the start of the week, with some minor data out of New Zealand in the early hours more upbeat than recent data, the services sector seeing a jump in activity in July, with food inflation also accelerating.

In the equity markets, the risk off sentiment was clear, with the Nikkei down 1.6% at the time of writing, a pickup in the Yen adding to negative sentiment, while the Hang Seng and CSI300 led the way, the pair down 1.81% and 1.80% respectively.

For the ASX200, the 0.52% fall will be considered more moderate, though with the jump in the U.S Dollar and continued slide in metal prices, the big Aussie mining stocks were seeing far heavier losses early on, with BHP Billiton and Rio Tinto down 1.54% and 1.53% respectively at the time of writing.

The Day Ahead:

For the EUR, economic data out of the Eurozone is limited to finalized July inflation figures out of Italy, which are unlikely to have an impact on the EUR, which was under the hammer through the early part of the day, as market panic over a possible collapse of the Turkish economy continued to weigh, the Turkish Lira seeing more losses this morning.

At the time of writing, the EUR was down 0.30% to $1.1379, the EUR’s first visit to $1.13 levels since July of last year, the Turkish curveball and possible contagion effects on the European financial sector hitting the EUR hard.

For the Pound, there are no material stats scheduled for release through the day, with the current geo-political storm having a relatively muted impact, the Pound having already been beaten into submission over Brexit and fears of a hard exit from the EU that is about to have its hands full should Turkey collapse into a financial crisis and begin defaulting on government paper.

At the time of writing, the Pound was down just 0.02% to $1.2752, performing better than its neighbouring EUR, though any negative Brexit chatter could get the ball rolling later today.

Across the Pond, while there are no material stats scheduled for release out of the U.S, the Dollar will be a talking point through the day, with a surge in geo-political risk seeing a jump in demand for the Greenback.

Direction for the Dollar and the broader markets will be in the hands of the Oval Office, which has managed to deliver the possibility of another financial crisis, in Europe at least…

At the time of writing, the Dollar Spot Index was up 0.06% to 96.41, with noise from the Oval Office in focus through the day.

For the Loonie, there are no material stats scheduled for release, with the risk-off sentiment across the global financial markets weighing on the Loonie at the start of the week.

Adding to the downside for the Loonie will be the lack of progress between the U.S and Mexico on NAFTA talks, the auto sector continuing to be a stumbling block, suggesting that it may not be smooth sailing for the Canadian government once they’re invited back to the negotiating table.

At the time of writing, the Loonie was down 0.15% to C$1.316, with geo-political risk likely to be the key influence through the day.