The US Dollar traded higher against other major currencies and extended its gains early on Friday to its highest level in a year.
Markets were rattled by a significant depreciation of the Turkish Lira plunging to a new all-time low. The fall of the Lira, which was already weakened by the state of the Turkish economy and skyrocketing inflation was accelerated by increasingly hostile diplomatic relations with the US, which recently announced sanctions against Turkish ministers and reports that the US would review its free trade agreement.
The strong Dollar pushed gold prices down. However gold remained above its July 2017 low.
Equities were seen lower on the increasing tensions between the US and China, while the volatility of the Turkish Lira could also have been a factor to connected economies.
Cryptocurrencies were able to recover some of their losses on Thursday, before again trading lower on Friday. Of the major cryptocurrencies especially Ripple saw a further downside, as it was reported that the Ripple network was processing less transactions now compared to the level seen in 2016.
On Friday key economic data is expected from the UK with GDP and trade data coming in, Canada regarding employment statistics and inflation data from the US.
The Euro sharply declined to a new one year low against the Dollar on worries about the Turkish economy and currency. With the unprecedented sell-off in the Turkish Lira, the European Central Bank (ECB) voiced concern about the exposure of European banks to the Turkish market. The ECB is reportedly mainly concerned about the banks BBCA, BNP Paribas (PA:BNPP) and UniCredit.
Meanwhile US economic data continued to show resilience with Jobless New Claims lower at 213 thousand (expected 220 thousand) and Wholesale Trade for June reported up by 0.1% m/m (expected 0%).
On Friday in France Industrial Production data and in Italy Merchandise Trade level statistics will be released. In the US the Consumer Price Index (CPI) and the Treasury Budget level will be published.
With the strengthening of the Dollar the Pound further declined and is on track to close for the fifth consecutive week lower towards a new 11 months low. Analysts mentioned the lower trading volumes during summer holiday for the increased drawdown.
Mounting concerns that the United Kingdom will actually have to go through with a so-called ‘Hard Brexit’, where the country exits the European Union without any future agreement, pressured the Pound since the start of the week, after the UK Trade Secretary mentioned in an interview that chances for that to happen stood at “60:40”.
On Friday key economic data such as the Gross Domestic Product (GDP), Industrial Production and Merchandise Trade statistics are due to be released in the UK.
Oil traded overall with little changes on Thursday and early on Friday with different political developments keeping the prices in check. While the upcoming sanctions against Iran by the United States, which would apply to the country’s oil sector as of November raise concerns over shrinking global supplies, the US seems to be isolated in its recent attempts to scrap the nuclear deal with Teheran as the European Union, China, India and others are committed to the deal and intend to support their companies continuing doing business with the Iran.
Another development is the trade conflict between the US and China, where China announced that it would introduce tariffs on US fuel exports as a recent countermeasure. However later it was announced that the China would not include crude oil on its tariff proposal.
On Friday the US Baker Hughes Oil Rig Count will be released and indicate the amount of operating oil rigs in the US.
US equity indices closed slightly lower on Thursday and extended losses in early trading on Friday, as most global indices declined with significant volatility in the currency markets.
Especially chip (US Semiconductors ETF -1.06%) and energy companies’ (US Energy ETF (NYSE:XLE) -0.95%) stocks traded overall lower, while gains were seen in basic materials (US Basic Materials ETF +0.49%).
Dropbox (+9.16%) reached a new 6-weeks high following up on the recent better than expected earnings. Dropbox’s post-IPO lockup period will expire soon, whereupon pre-IPO shareholders will be permitted to sell their stock holdings.
Tesla (NASDAQ:TSLA) (-4.77%) saw further downside from its recent high, after CEO Elon Musk announced on Twitter that he wanted to take the company off the exchange at $420 per stock with “secured funding”. Investors and reportedly the SEC as well are questioning this move.
The earnings season is coming towards its end, but still next week key companies such as Nvidia, Walmart (NYSE:WMT) and Cisco are due to release their quarterly earnings results.
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