Markets are shifting and growing increasingly cautious as EM risk aversion builds, China’s and Europe’s PMIs disappoint, Japan reports a record trade deficit, the Fed highlights it is on track to taper by $10bn per meeting and once again tail risks are emerging to drive FX markets. Accordingly, today’s pattern is suggesting of buildingrisk aversion, with JPY and gold top performers; and SEK, NOK and AUD underperforming. US CPI (see top chart) is an important release today, but market attention will also remain on global developments, including the G20. Yesterday, the IMF highlighted the importance of avoiding the premature withdrawal of monetary accommodation and called for closer coordination of policy globally which could help productivity and decrease risks associated with renewed global turmoil.
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Scotiabank