View from London: Emerging Markets Lead from Brazil to South Africa

Focus: CURRENCIES

Robert Savage Image Robert Savage Partner & CEO, CCTrack Solutions

Japanese yen is still the key focus for risk barometers even as euro/Swiss franc breaks to new highs, asserts Bob Savage, CEO of Track Research in Friday commentary from London.

The main focus overnight was on the US data ahead and the echoes of ECB Draghi policy shift fears–stoked by the WSJ article on his Jackson Hole Speech in August.

Those risks weren’t enough to make fear beat greed today.

The relative dovish Yellen testimony was also still ringing in the ears of investors leaving bonds bid, stocks bid, the USD lower, carry trades higher.

Japanese yen (JPY) is still the key focus for risk barometers even as euro/Swiss franc (EUR/CHF) breaks to new highs as the euro/US dollar (EUR/USD) remain stalwart and bid over 1.1380 still.

The CPI today in the US maybe the central piece of data for the week as it is seen as key for whether the FOMC normalizes rates in September or December or both. The risk of a weaker print may be the death blow for the USD finding a bottom this week.

Other trades will follow as the entire return for the week has been a significant flip from unwinding risk-parity trades to re-embracing them.

Emerging markets have led the way from Brazil to South Africa. Nothing much happened overnight in prices other than that stretch with focus on Australia/US (AUD/USD) leading the G7 in gains.

The only issue is the yen to the dollar (USD/JPY) and its relationship with US rates. As the reaction function of markets may be faster than the reaction of central bankers–with 113 a pivot for 111.80 again.

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