Currencies conformed to a strict risk aversion pattern overnight, taking cues from the carnage in equity markets. JPY topped the bunch, while NZD trailed.
Commodities and biotechnology stock led equity indices lower on both sides of the Atlantic.
Commodities giant Glencore lost an eye-watering 29% in London, as analysts warned about its debt load in an environment of low commodity prices.
Valeant Pharmaceuticals shed 14% after Democrats in Congress moved to subpoena the company on drug pricing.
This comes the week after Hilary Clinton unveiled a plan to curb ‘unfair’ pricing as part of her platform for the US presidency.
The S&P 500 is 2.4% lower at the time of writing, setting on course for its lowest close since the worst of September’s rout.
In the absence of much meaningful macroeconomic data, currencies simply traded to theme. JPY and CHF reprised their usual roles as haven currencies. Emerging market currencies dominated the bottom half of the leaderboard.
NZD tripped from best to worst, with the turn in risk sentiment putting paid to a close above 0.64.
NZD flirted with the idea of a break in the Asian session, coinciding with a drift in NZD/AUD above 0.91. We’d viewed the prospect of a convincing break through both levels as fairly promising this week. It could yet happen, but risk appetite would need to improve materially.
Today’s data calendar offers little inspiration. The only notable release is German CPI inflation for September, which precedes the euro-zone release tomorrow.
The combination of a strengthening EUR and falling oil prices has put fresh downward pressure on inflation, stoking speculation of an expansion of the ECB’s QE programme. So far, ECB officials have sounded relatively cool on the idea, viewing the oil price impact as temporary in nature.
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Raiko Shareef is on the BNZ Research team. All its research is available here.
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