FX Update

Increased tension in Hong Kong and an upset in Argentine elections distress markets

Investors moved into risk-off mode after protestors shut Hong Kong’s airport and Argentina’s President, Mauricio Macri, unexpectedly lost a primary vote. Demand for safe haven assets rose, including the US dollar, US treasuries, the Japanese yen, Swiss franc and gold. Equity markets are lower, especially those in emerging markets. A full week of US economic data releases lies ahead.

Monday: Bloomberg August Germany, France, Italy and Spain Economic Surveys
Tuesday: NFIB Small Business Optimism, Consumer Price Index, Real Avg Earnings
Wednesday: Import / Export Prices
Thursday: Nonfarm Productivity, Retail Sales, Initial Jobless Claims
Friday: Housing Starts, University of Michigan Sentiment

  • FX Rates
    August 12, 2019

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.

  • USD

    Following a bearish close last Friday, the dollar showed a mixed performance overnight. Safe haven buying pulled the dollar higher against emerging market currencies, but it dropped against both the EUR and GBP. A week of key economic data lies ahead. Long-term investors remain bearish the dollar, fueled more recently on market chatter of overvalued status. On the other hand, short-term speculators remain bullish the dollar, fueled by the recent increase in geopolitical risks – Hong Kong tensions, a looming no-confidence vote in Italy, a primary election defeat of Argentina’s president, and increased odds of a no-deal Brexit.


    The UK pound bounced hard off 10-year lows near $1.20 reached earlier today, and currently trades near $1.21. Asian traders sold the pound initially following a UK-based report released on Sunday saying that parliament may not be able to avoid a no-deal Brexit outcome. Once the European trading session began, the pound rallied and short-covering drove it higher. The risks associated with a no-deal Brexit dominate trading concerns more so than any UK economic data.


    The euro traded over $1.12 in a short-covering rally. Italian parliament is meeting today to decide when PM Conte will have to face a no-confidence vote, which many investors welcome since it may end the awkward coalition in power for more than a year.


    The Canadian dollar weakened slightly overnight, the key themes being lower oil prices and safe-haven buying of the US dollar.


    Protestors closed Hong Kong’s airport, pushing HK equities lower and increasing pressure on EM assets worldwide. The Hong Kong dollar edged lower and the Chinese yuan actually edged higher, as the PBOC wants to show market stability in FX markets as domestic tensions grow.


    Argentina assets and the peso plummeted after President Mauricio Macri unexpectedly lost a primary vote by a landslide. The vote indicates a likely defeat in October’s presidential election and a possible return to the unpopular policies of his predecessor, Cristina Kirchner.

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