Markets have finally returned to some measure of normalcy and calm after a wildly volatile week.
Overview
The United States Dollar is relatively flat on the morning, and is set to close out the week fairly close to pricing from last Friday on most majors. Though there is a touch of pessimism still in traders’ minds after Monday’s shock crash, there is a sense of, at least relative, calm permeating the dog days of summer this morning.
Haven assets are no longer nearly in the demand they were earlier this week, but the remnants of fear still weigh on the minds of traders. After yesterday morning’s unemployment report helped to assuage fears that the US labor market could be in a flash crash, equities were able to stage a bit of recovery, but are fairly flat today. For as many assets and currencies that are close to even with last Friday’s pricing, there is no doubt that the impact of the weekend and Monday’s wild selloff will be felt across the bottom line of many corporations – and nations – for months to come. Admittedly, trading desks across all assets are staffed more thinly in the summer, which is a big reason volatility was so high this week, but the macro reasons behind such price action do remain valid.
Next week does have a busier data calendar, so while we don’t expect to see nearly as much swinging in prices as this week, there are likely to be some bumps in the road.
What to Watch Today…
- Monex USA Online is always open.
JPY ⇑
Japanese Yen continues to vex traders around the world after a wild week is set to wrap up with the Yen on the front foot, but still down nearly 4% from Monday’s strong point. Yen pricing has been on a hair trigger the entire summer after the Bank of Japan intervened on behalf of the currency and hiked interest rates more than markets expected last week but then followed these moves up this week with an extra-dovish statement. The popular JPY-based carry trade is now almost entirely unwound, and traders do expect that the BoJ has the potential to raise interest rates further this calendar year. JPY remains a popular safe haven asset.
MXN ⇑
Mexican Peso has finally broken out of inverse price action with the Japanese Yen and is also gaining ground this morning following a hawkish interest rate cut from Banxico yesterday. Mexico’s inflation did tick a bit higher last month, which gave central bank officials some pause and resulted in a split decision yesterday afternoon. MXN traders are looking ahead to the beginning of Claudia Sheinbaum’s administration next month, which as the US election cycle continues to heat up, promises to bring continued volatility to the USDMXN pair.
