Markets are in a calmer mood following the big risk-off move the previous day. After the chunky 1.8% drop in the S&P500 yesterday, it is up 0.8% for the day, while the VIX index has fallen from around 15.5 to 14.5. The USD has recovered as well. Much of the positive movement has been attributed to a Zero-Hedge report which highlighted an earlier testimony by former FBI director Comey, where he said that “he had not been pressured to close an investigation for political purposes”. This might get President Trump off the hook.
While President Trump is now officially under investigation over some of his recent actions, he’ll be pleased that another President is now on the naughty seat and has diverted some attention away from him. Allegations have been thrown at President Temer of Brazil that he approved bribery payments for the country’s disgraced former speaker of the lower house. Brazilian markets have spat the dummy and this has helped support the USD, which is up against almost all the majors and EM currencies. The Brazilian real is down 6%.
The USD has also been supported by some strong data. Jobless claims fell for a third consecutive week, with the figures consistent with further tightening in the US labour market. And against expectations for a weaker result, the Philly Fed index shot up to almost match the multi-decade high set earlier this year. The USD majors index is up 0.5%, regaining some of the lost ground this week.
GBP was driven up after very strong UK retail sales data, even if driven by good weather, blasting through 1.30 for the first time since September. However, the gain hasn’t been sustained as there’s only one way for spending to go, especially when real wages are falling. There was a mini flash-crash this morning that saw it plunge 100pips back below 1.29. It currently sits at 1.2940.
Amidst a stronger USD backdrop, the NZD is back below 0.69, but it is also softer on most of the crosses as well. Strong technical support kicks in about half a cent lower. The AUD has managed to perform relatively better, supported by stronger than expected labour market data released yesterday. NZD/AUD is down about half a cent to around the 0.93 mark.
Better risk sentiment and a stronger USD sees USD/JPY up to 111.50, after reaching as low as 110.25 last night. EUR met some resistance around 1.1170 and is now trading around 1.11.
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