Volatility in equity markets stabilises

7th February 2018 Market Update

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?? GBP - With no data released yesterday the pound saw moves based on the volatility in the equity markets, losing ground to the dollar initially as investors sought the relative safety of the greenback as equity markets fell overnight. However, as the day progressed and the equity markets recovered so did the pound, ending the day almost back to where it started.

With the absence of any data today from the UK, markets will focus on how the equity markets fare today and also any further Brexit negotiations. According to a leaked document, the European Commission might ask the UK to pay a higher Brexit bill than agreed last year. There would be demand to "cover the financing, during the transition period”. In addition, the EU wants the power to restrict the UK's access to the single market during the transition period. All of which puts pressure on further negotiations.

?? EUR - German factory orders smashed expectations first thing yesterday coming in at 3.8% vs an expected 0.7% helping the euro gain ground against the pound in the morning, though much of the gains were erased by the afternoon. Today we have very little on the calendar with only the ECB non-policy meeting this morning, however this is likely to have little impact on the currency rates.

?? USD - The dollar appreciated on the back of inflows after the steep fall in global equity markets but moved back to almost where it started the by the end of the day. Jobs figures missed expectations yesterday but were largely overlooked. Today, we have little on the calendar bar a couple of speeches by Fed members this afternoon, any indication of future rate hikes will be monitored closely.


Key Announcements

?? USD
13:30pm: Fed’s Dudley Speech
15:15pm: Fed’s Evans Speech

?? NZD
20:00pm: RBNZ Rate Statement & Decision
21:00pm: RBNZ Deputy Governor Speech & Press conference


Summary: Global markets stabilised yesterday after a steep initial sell off. The dollar soared to near two-week highs as investors moved out of equity markets, however much of this move was reversed by the end of the day as equity markets stabilised and saw some recovery.


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