Risk-on moves seen after positive news from Hong Kong
US stocks rise back towards resistance levels; EM currencies surge
GBP bounces back despite soft data
CAD gains on BOC rate decision
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There’s been a clear push higher in global equities today with sentiment improving markedly on reports that the protests in Hong Kong could soon come to an end. European markets have rallied broadly with the German Dax back above the 12000 level and US indices are trading firmly in the green around the time of the cash close on the continent.
Emerging market currencies like South African rand (ZAR), Turkish lira (TRY) or Polish zloty (PLN) had very turbulent summer as deteriorating global outlook and tensions around China drew capital outflows. However, hopes that Hong Kong protests may cease and US data suggesting that manufacturing is being hurt by the strong dollar leads to a strong recovery today. USDZAR is plunging by 1.4%, followed by USDTRY, USDMXN (both -0.8%) and USDHUF (-0.7%).
After falling below the $1.20 handle yesterday there’s been a bit of a bounce in the pound despite some more data pointing to a slowing UK economy. For the third time in as many days, a leading industry survey has come in worse than expected, painting a rather bleak picture of economic activity. While the Services PMI reading of 50.6 remains just above the level that would signal contraction, an all-sector PMI has now fallen to 49.7 which indicates a negative GDP print for Q3 is probable. The release has caused a bit of a pullback in the pound, but after the early weakness yesterday the currency seems to be seeking to carve out a bottom around these levels.
Another currency that is on the rise is the Canadian dollar, with the Loonie surging after the BOC kept rates unchanged at 1.75%. There wasn’t really anything particularly hawkish about the accompanying statement but it was more the absence of a clear dovish shift that contributed to the move. It seems the BOC are happy to bide their time and not in a rush to try and follow the global trend of central bank’s shifting to a more dovish stance.