Major Overnight Headlines
• Japan trade deficit at JPY1.0 trillion in July, YoY rise in imports outpaces exports by about 8%
• ZAR, MXN, IDR and INR amongst biggest decliners versus USD as sovereign debt yields rise, equities fall
With the normal disclaimers concerning low turnover, thin summer markets and position shakeouts all still applicable, we’d be very surprised if the persistent upward pressure on EUR/USD and GBP/USD didn’t in part reflect the typically antagonistic and rather careless tendency of FX market participants to inflict pressure where the pressure points are the greatest. In this case, those pressure points relate to the desire of investors to pull the ECB and the BoE out of their “bluffs” and thereby test the Banks’ true abilities to sit on their respective yield curves and physically keep rates anchored – particularly at the front-end. In basis point terms, UK and German 2-year rates actually rose more than their US counterpart this morning in London.
Read the full report: FX Daily
BMO