Good morning,

Yesterday’s key movement was driven around the macro fears bleeding around the globe.

The US yield curve inverted for the first time since the financial crisis in 2008, showing a strong indicator that market fears of a global recession are growing. With Asian debt markets geared to follow suit, and disappointing data in Germany and China yesterday, the painting of this picture is becoming much more vivid.

The implication this is likely to have on currencies will follow the markets fear of riskier investments, with money flooding into haven assets.  US equities lost 3% whilst Gold accumulated the fear demand, and the Japanese Yen spiked as one of the stronger haven currencies.

The EURUSD got knocked below the key 1.1160 level with Germany pulling confidence down.

If you are trading in emerging markets then this will need to be closely monitored as the demand, and therefore strength will be highly affected by global market strength.

The pound will face retail sales numbers this morning, with a negative read anticipated, whilst the US expect a better result this afternoon. This topped off with Corbyn’s plan to call a no-confidence vote to block a no-deal will put the GBP under some volatile pressure to end the week, as markets debate the possible leadership change vs a no-deal crash out.

Considering your forward exposure of currency is essential at this point, as downside protection is critical. Call in to have a discussion with your account manager around risk mitigation and scenario planning.

Have a good day.

Author: Ross Hammond, Senior Corporate Account Manager