Next week could be another volatile one for the stock markets. Now, you may be wondering why we are concentrating on the Nikkei as opposed to, say, a U.S. index, given the sheer number of high-impact U.S. data in the week ahead.
Depending on your trading style, you either can’t wait to hear the closing bell at the end of today’s U.S. session or you’ll be extremely sorry to see this week come to an end. Either way, there’s still another two and a half weeks before the Fed’s highly-anticipated September monetary policy meeting.
Amidst the recent global market turmoil, I’d like to postulate that “We are all USD/JPY traders now.” That’s because USD/JPY has become the de facto measure of risk appetite of late, leading to correlated moves in equities, commodities, bonds, and even other currency pairs. The most salient short-term example of this phenomenon is the recent roller coaster ride in U.S. equities.
Amidst the rollercoaster ride that unexpectedly seized most global markets over the last few days, trade in British pound/U.S. dollar currency pair has remained relatively sanguine. The cable rallied “just” 80 pips on Monday, while the dollar lost far more value against the euro and yen, before reversing that move on Tuesday to trade back at the 1.5700 level.
It’s been a tale of two halves this Friday morning. The market was spooked by a global stock market sell-off that saw stocks plunge to their lowest level in months, and some EM currencies drop to fresh record lows
The dollar was once considered a safe-haven; however, during the recent bout of market panic, when stock markets like the Dax have had their biggest weekly decline since September 2011, the buck has had a torrid time versus other G10 currencies.
Despite this morning’s slight disappointment in Eurozone GDP (0.3% q/q vs. 0.4% expected), there hasn’t been too much movement in the foreign exchange markets as traders look ahead to a promising late summer weekend