Market Roundup
• Trump escalates feud with Turkey, imposing higher metals tariffs.
• Erdogan tells Turks to buy crumbling lira as Trump turns the screws.
• Turkey's Albayrak rolls out new economic plan, but lira slide continues.
• US Jul CPI m/m SA, 0.2%, 0.2% forecast, 0.1% previous.
• US Jul CPI y/y NSA, 2.9%, 3.0% forecast, 2.9% previous.
• US Jul Core CPI m/m SA, 0.2%, 0.2% forecast, 0.2% previous.
• US Jul Core CPI y/y NSA, 2.4%, 2.3% forecast, 2.3% previous.
• US Jul Federal Budget (USD), -77.00 bln, -77.00 bln forecast, -75.00 bln previous.
• Russia tells Washington curbs on its banks would be act of economic war.
• U.S. judge calls recess in Manafort trial; to resume in midafternoon.
• China's c.bank to maintain prudent policy, keep yuan steady.
• CA Jul Unemployment Rate, 5.8%, 5.9% forecast, 6.0% previous.
Looking Ahead - Economic Data (GMT)
• No major economic events are scheduled
Looking Ahead - Events, Other Releases (GMT)
• No major events are scheduled.
Currency Summaries
EUR/USD is likely to find support at 1.1386 levels and currently trading at 1.1416 levels. The pair has made session high at 1.1449 and hit lows at 1.1382 levels. The euro declined against the dollar on Friday as dollar as a plunging Turkish lira sparked broad risk aversion, with investors worried about a contagion effect on European banks. Turkey’s lira plummeted as much as 18 percent on Friday as worries about President Tayyip Erdogan's influence over monetary policy and worsening U.S. relations snowballed into a market panic. The euro was hurt after the Financial Times reported that the European Central Bank had concerns about banks in Spain, Italy and France and their exposure to Turkey's woes. Both currencies added to losses after U.S. President Donald Trump said he had authorized a doubling of tariffs on steel and aluminum imports from Turkey. "Our relations with Turkey are not good at this time!," Trump said on Twitter. Erdogan earlier told Turks to exchange gold and hard currency into lira, framing the crisis as a "national battle" against economic enemies. The euro dropped below technical support at $1.15 to $1.1393, down 1.15 percent on the day and the lowest since July 2017. Against the yen, the euro slid 1.56 percent to 126.03 yen, a more than two-month low. The dollar index edged only slightly higher after data on Friday showed that core consumer prices rose 0.2 percent in July, in line with economists’ expectations and the same gain as in May and June.
GBP/USD is supported in the range of 1.2700 levels and currently trading at 1.2769 levels. It reached session high at 1.2792 and dropped to session low at 1.2720 levels. Sterling declined against the dollar on Fridays a stronger dollar and continued concerns that Britain could leave the European Union without a trade deal pushed investors to sell pounds. The British currency dropped 0.8 percent to as low as $1.2723, roughly in line with the dollar's large rise against a basket of major currencies. The dollar surged on Friday after an investor rush into safer assets on fears of a broader market contagion from a dramatic slide in the Turkish lira. Sterling has lost 3 percent of its value in August, including 2 percent this week. The pound is headed for its worst weekly performance since February. Official data on Friday showing Britain's economy picked up some speed in the second quarter - growing at an expected 0.4 percent after a winter slowdown - provided brief support to the currency. But the data also pointed to an economy losing momentum in June, and analysts say political worries about Brexit negotiations will keep the pound under pressure. Against the euro, the pound has held up far better as demand for dollars has kept the euro on the back foot.The pound traded up 0.1 percent to 89.865 pence per euro, above its recent 2018 lows of 90.30 pence. Sterling has been pushed lower as investors rush to protect themselves from further weakness in the run-up to Britain's exit from the EU next March.
USD/CAD is supported at 1.3070 levels and is trading at 1.3129 levels. It has made session high at 1.3152 and lows at 1.3070 levels. The Canadian dollar weakened to a more than two-week low against the greenback on Friday as the threat of an economic crisis in Turkey spreading to other countries rattled global financial markets, offsetting stronger-than-expected domestic jobs data.A plunge in the Turkish lira rocked global equities and emerging markets (EM) and fear of more turmoil sent investors scurrying for safety in assets like the yen and U.S. government bonds. Canada exports many commodities and runs a current account deficit so its economy could be hurt if the flow of trade or capital slows.The country unexpectedly added 54,100 jobs in July and the unemployment rate dipped to equal a record low 5.8 percent, but analysts said the data was weaker than it appeared. The loonie, which has been buffeted in recent days by a diplomatic row between Saudi Arabia and Canada, was on track to fall 1 percent for the week, its biggest decline since June. Speculators cut bearish bets on the Canadian dollar for the fourth straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of Aug. 7, net short positions had fallen to 24,898 contracts from 31,569 a week earlier.U.S. crude oil futures settled 1.2 percent higher at $67.63 a barrel but were still lower for the week. Oil is one of Canada's major exports. The Canadian dollar was trading 0.6 percent lower at 1.3135 to the greenback. The currency touched its weakest level since July 25 at C$1.3152.
USD/JPY is supported around 110.42 levels and currently trading at 110.91 levels. It peaked to hit session high at 111.20 and made session lows at 110.49 levels. The Japanese yen edged higher against the dollar on Friday as the crisis engulfing Turkey's lira boosted demand for safe heaven Japanese yen. The lira has long been falling on worries about Erdogan's influence over monetary policy and worsening relations with the United States. That turned into a rout on Friday, with the lira diving more than 18 percent at one point, the biggest one-day drop since Turkey's 2001 financial crisis. It has also lost more than 40 percent this year, hitting a new record low after Trump took steps to punish Turkey in a wide-ranging dispute. Trump said he had authorised higher tariffs on imports from Turkey, imposing duties of 20 percent on aluminium and 50 percent on steel. The lira, he noted on Twitter, slides rapidly downward against our very strong Dollar. Erdogan's characteristic defiance in the face of the crisis has further unnerved investors. The president, who says a shadowy "interest rate lobby" and Western credit ratings agencies are attempting to bring down Turkey's economy, appealed to Turks' patriotism.
Equities Recap
European shares fell on Friday as a dramatic fall in the Turkish lira jolted markets, with banks such as Spain's BBVA and Italy's UniCredit hit by worries over their exposure to Turkey.
UK's benchmark FTSE 100 closed down by 1 percent, the pan-European FTSEurofirst 300 ended the day down by 1.15 percent, Germany's Dax ended up by 2.1 percent, France’s CAC finished the day down by 1.7 percent.
U.S. stocks slid on Friday as a deepening economic crisis in Turkey dragged on bank shares and triggered a move out of riskier assets.
Dow Jones closed down by 0.77 percent, S&P 500 ended down by 0.71 percent, Nasdaq finished the day down by 0.67percent.
Treasuries Recap
The U.S. Treasury debt market rang up its best day in more than two months as investors scooped up low-risk government debt on anxiety about Turkey's financial problems spreading to other emerging economies and lenders exposed to the sector.
The yield on benchmark 10-year Treasury notes touched 2.855 percent, its lowest in almost three weeks. At 3:00 p.m. (1800 GMT), it was down over 8 basis points at 2.853 percent for its steepest one-day decline since slumping on a political crisis in Italy in late May
Commodities Recap
Gold prices gave up earlier gains on Friday, with the crisis engulfing Turkey's lira boosting demand for bullion as a safe investment while at the same time bolstering the U.S. dollar, making gold more expensive for buyers with other currencies.
Spot gold was unchanged at $1,211.94 per ounce by 1:43 p.m. EDT (1743 GMT), with the dollar more than 0.9 percent stronger against a basket of major currencies. Gold was set to end the week largely unchanged after four consecutive weeks of price falls.U.S. gold futures for December delivery settled down 90 cents, or 0.1 percent, at $1,219 per ounce.
Crude oil prices rose more than 1.0 percent on Friday as U.S. sanctions against Iran looked set to tighten supply, but futures contracts posted a weekly decline as investors worried that global trade disputes could slow economic growth and hurt demand for energy.
Benchmark Brent crude oil settled 74 cents higher at $72.96 a barrel on Friday. U.S. light crude was 82 cents higher at $67.63 a barrel.
