Fears of contagion continued to weigh on risk sentiment for the most part of the session, although major pairs cruised in smaller ranges on the lack of top-tier catalysts.
The yen and the franc were able to take advantage of these risk-off flows while the Kiwi and Aussie lagged far behind, with the latter getting more drag from weaker gold prices.
- No major economic reports released
- Risk aversion on Turkey’s sliding lira still in play
- Chinese data dump coming up
Some risk-off flows
It was a relatively quiet day in terms of economic releases, so market watchers kept their attention on geopolitical risks and potential contagion from Turkey.
Although a number of analysts have already pointed out that the risk of a spillover to the U.S. or European markets is limited, investors can’t help but worry that a slowdown in emerging markets could add to trade-related uncertainties worldwide.
U.S. equity indices all closed in the red:
- Dow 30 index is down 125.44 points to 25,187.70 (-0.50%)
- S&P 500 index is down 11.35 points to 2,821.93 (-0.40%)
- Nasdaq is down 19.40 points to 7,819.71 (-0.25%)
Commodities were also broadly lower, with gold taking huge hits despite safe-haven demand.
- Gold slipped below the $1,200 barrier to $1,193.54 per troy ounce (-1.15%)
- WTI crude oil is down to $67.33 per barrel (-0.44%)
More factors weighing on oil
On the subject of Black Crack, a couple of updates put more weight on the commodity during the day. One of these is Saudi Arabia’s downgrade on global crude oil demand for 2019 by 130,000 barrels per day to 32.05 million barrels per day.
The cartel also increased production by 41,000 barrels per day from June to July as part of its agreement to pump more oil in order to stabilize prices. As it turned out, the kingdom still reduced its own output as it tried to avoid an oversupplied market.
Meanwhile, the U.S. reported a larger increase in inventories of 1.7 million barrels from Cushing in the week ending on August 10, according to Genscape.
Major Market Mover(s):
CHF & JPY
The yen rebounded from its dip in the earlier session as risk aversion persisted on the lack of any major market developments. Meanwhile, the franc just kept raking in more risk-off flows throughout the day.
USD/JPY retreated to 110.67, EUR/JPY turned after hitting a high of 126.77 and fell to 125.98, and GBP/JPY dropped from 141.84 to 141.02.
USD/CHF slid from .9949 to a low of .9918, NZD/CHF continued its slide to .6531, AUD/CHF tumbled to a low of .7212, and CAD/CHF is down to .7565.
The Aussie found itself in last place at the end of the New York session on risk aversion. The tumble in gold, which is being pinned on the stronger dollar, also took its toll on the correlated commodity currency.
AUD/USD slipped from a high of .7286 to .7256, AUD/JPY tumbled to a low of 80.36, EUR/AUD popped up to the 1.5700 levels, and GBP/AUD is up to 1.7548.
Watch Out For:
- 1:30 am GMT: Australia’s NAB business confidence index
- 2:00 am GMT: Chinese fixed asset investment ytd/y (another 6.0% gain expected)
- 2:00 am GMT: China’s industrial production y/y (rise from 6.0% to 6.3% expected)
- 2:00 am GMT: Chinese retail sales y/y (increase from 9.0% to 9.2% expected)
- 2:00 am GMT: China’s unemployment rate (4.8% previous)
- 4:30 am GMT: Japan’s revised industrial production (no change from -2.1% expected)