Spreadex Market Update
FX Volatility Back Up At March 2020 Levels Following Wild GBP Swings
Monday saw a highly volatile start to the week for financial markets. Following a sharp drop lower, GBP was seen rebounding firmly higher over yesterday’s session with GBPUSD almost turning positive on the day before settling just below its opening price. There was speculation that the BOE would be forced to announce an emergency rate hike in response to the crash, which was partly responsible for the GBP recovery.
However, the bank announced they would not be using this option (though would keep it open) and instead would monitor price action into the November BOE meeting. The UK government also announced that it would deliver a full budget assessment in November following last week’s mini-budget . Traders now look to the BOE’s chief economist Huw Pil who speaks today.
Key Factors for Today
- USD softens a little across Tuesday open following further rally yesterday
- Equities stabilising at lows, remain vulnerable to further downside
- GBP reverses majority of Monday’s losses – BOE refrains from emergency hike but monitoring situation
- NZD leads in FX
- JPY softens – Kuroda defends BOJ intervention
- Powell speaking today
- Metals and commodities stabilise
Coming Up
- USD US CB Consumer confidence
- GBP BOE’s Pill speaks
- USD Fed’s Powell speaks
Equities In the Red on Monday, Rebounding Today
Equities markets saw difficult trading across the board yesterday. In the US, the S&P and NASDAQ are now both testing the yearly lows as a rampant USD puts downward pressure on sentiment. In Europe both the DAX and STOXX600 were seen hitting fresh 2022 lows yesterday. The FTSE was seen trading lower too as the rebound in GBP put pressure on asset prices. It was a similar story in Asia and Australia too with both the Nikkei and the ASX testing news lows before seeing some demand kick in.
Looking at the opening tone in Europe today, some softness in USD is allowing a better start for markets though equities remain vulnerable to further downside should USD begin moving higher again.
Biffa PLC Sees 30% Jump on Buyout News
In the UK, waste management firm Biffa PLC has seen its share price surge roughly 30% higher today as it agrees to a £1.3 billion buyout from Energy Capital Partners. The announcement today comes three months after Biffa was approached with the deal at 410 pence per share.
NZD Leads in FX
In FX, the softer start for USD today has allowed key counterparts to recover with NZD taking the lead as the strongest performer over late Asian and early European trading today. NZD has rallied 1.4% on the day so far, leading the gains against USD. FX volatility is now back at its highest levels since the start of the pandemic following last week’s BOJ intervention and the subsequent price action we’ve seen in GBP.
JPY & USD Soften – Powell Speaks Today
JPY and USD have been the weaker performers so far today with better demand in equities leading to a loss of safe-haven flows. Yesterday, BOJ’s Kuroda defended the central bank’s actions as necessary, reaffirming the need to maintain monetary easing to help buffer the economy. Today’s Fed’s Powell speaks and, if any further details on the bank’s inflation outlook are given, this might well reignite the USD rally.
Metals & Oil Stabilise
In the metals and commodities space, we’ve seen a stronger start across the board today with gold, silver and oil each trading in the green following further losses yesterday. Gold and oil were seen hitting fresh 2022 lows in the wake of a further USD move higher and look vulnerable to continued losses if USD bulls regain momentum today.
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