Good morning,
JPY – Spiking but on what?
It’s rare we start with the yen but movements overnight have made it impossible to not do so. A ‘flash crash’ in the yen – a period of extreme market moves, driven by computer algorithms – caused the yen to rise by 8% overnight, moving everything from the US dollar to the Turkish lira and the Australian dollar.
Those picking over the ruins will look to see whether this was caused by Apple cutting its retail outlook for 2019 or a simple turn of sentiment by Japanese investors but the genesis isn’t particularly important in the grand scheme of things. The moves were exacerbated by the lack of liquidity in Asian markets at this time of year and computer programs designed to jump on such moves.
How quickly these moves are unwound and prices return to something close to what is deemed as ‘normal’ will determine just how febrile market sentiment is and whether this was a mere mistake or something deeper set.
GBP – Caught when weak
Unfortunately for the pound, it was also dragged into the ‘flash crash’ and finds itself lower against both the USD and EUR this morning as a result. Sterling had already started the year negatively following December’s manufacturing PMI.
The survey showed that Brexit preparedness is starting to drive activity in the UK’s manufacturing sector both suppliers and customer increasing inventory and stock holdings ahead of any possible outcome by the end of March.
Despite this increase in demand, confidence remains weak as everyone knows that these increased supplies of raw materials, constituent parts and finished goods will eventually run out and supply chain disruption will hurt businesses later down the line. No-Deal Brexit planning will exacerbate this – a deal and certainty needs to be found soon to ensure disruption is kept to a minimum.
We will hear from the construction sector at 09.30 today and the services sector at the same time tomorrow.
You can see what we think 2019 holds for the pound here.
USD – Rotten Apple
Apple, the world’s largest technology firm, lowered its revenue targets for the first quarter of this year on the basis of unexpectedly greater slowing demand in China. Such is the impact of Donald Trump’s trade policy and we are only two months away from the current truce on tariffs expiring and taxes on $200bn of Chinese goods coming into the US rising to 25%.
Yesterday congressional leaders were unable to come to an agreement with Donald Trump over a funding program that would allow the US government shutdown to end. Talks will continue today.
What does 2019 hold?
As we have noted above, our forecasts and predictions of 19 currencies that WorldFirst clients trade, hold, spend and earn are now live on our blog. Whether you spend South African rand, earn Australian dollars or want the Swedish krona to fall in value we have taken a look at what the next 12 months could hold.
The full list and all of our thoughts are available at https://www.worldfirst.com/uk/blog/2019-currency-outlooks
For now, have a great day