Market Drivers August 27, 2018
UK on holiday
Nikkei 0.88% Dax 0.56%
Europe and Asia:
EUR EZ IFO 103.8 vs. 101.9
It’s been a quiet, choppy start of the week in FX space with most majors stuck in 30 pip ranges in lackluster trading with London markets off on a holiday making late summer trading even more rangebound than usual.
After a strong risk-on open in Asia that saw EURUSD spike to 1.1655 the majors quickly gave up gains as emerging market risk turned markets the other way. The Turkish markets were open for the first time in a week and USDTRY promptly rose by 3% creating downside pressure on the ruble and the rand as well. The EM pressure sent EURUSD back below 1.1600 but the pair stabilized and bounced after IFO data beat.
The IFO came in considerably better at 103.8 versus 101.9 helping the euro to ignore the downward flows in the EM space. Analysts forecast that at current levels of IFO German GDP should grow at 0.5% this quarter. According to IFO economist, Klaus Wohlrabe export expectations have rebounded significantly since July and that bodes well for the German economy with IFO now expecting full-year growth between 1.8% and 1.9%.
With no US data on the docket, trading should remain quiet for rest of the day. The dollar continues to see some mild selling pressure after Friday dovish speech from Jerome Powell but USDJPY appears to have some support below 111.00 for now, although any selling wave in North American trade could take the pair below that figure once again especially if risk-off flows accelerate. For now, the markets remain choppy with little directional pull either way.