Just as US-China trade talks move in reverse, a new EM crises moves forward. The worst day in the history for Argentine stocks, coupled with continuing protests in Hong Kong added to a risk off tone on Monday. Silver are gold are soaring at 17.50 and 1535 respectively. CFTC positioning data showed just how hated the pound has become as well as further stabilizing of sentiment in the euro. The Premium trade issued late Friday to exploit the bounce is now +400 pts in the green. US CPI is due next. 


EM Risks Bubble Over - Tweet Goldman Recession (Chart 1)

Unease about China-US trade was the biggest factor in the round of risk aversion on Monday but some emerging market risks are beginning to catalyze. Argentina's primary elections ended in disaster for local markets. The vote is largely indicative, but showed that Peronists have a nearly insurmountable lead ahead of October elections. The Merval Index fell 38% in the biggest one-day drop on record, while the Peso fell 17%.  Argentina is ring-fenced from the global financial system and the contagion in neighbouring countries was modest, but it served as a stark reminder of political risk.

Protests in Hong Kong continue to draw massive numbers and on Monday they shut down the airport, which is the seventh-busiest in the world. Social media videos showed Chinese police conducting large-scale drills in neighbouring Shenzen. If Beijing intervenes, it will spark an international incident in what will be a test of China's power and resolve.

The resulting moves led to modest risk aversion in FX but larger moves in bonds. US 30-year bond yields fell 12.6 bps and touched a fresh low since 2016. Gold also hit a fresh six-year high.

Italy Politics back in Disarray

League leader Matteo Salvini is attempting to force a snap election and that would trigger memories of euro risks in past votes, but there are reasons to believe that this time is different. The ECB's bond buying has essentially sanitized political risk in the eurozone, at least on the fiscal side. Italian 10-year yields rose 30 basis points on Friday but hit just 1.80%. That's a distant cry from the +7% levels in the eurozone debt crisis. The tide is also slowly turning against austerity in the EU with Germany under pressure to spend as the economy stumbles.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.
EUR -44K vs -53K prior GBP -102K vs -90K prior JPY +11K vs -4K prior CHF -16K vs -14K prior CAD +24K vs +21K prior AUD -55K vs -53K prior NZD -12K vs -17K prior

The net short in the pound is at the most-extreme since April 2017. At some point the pound will overshoot – and we might be there already as talk about USD parity becomes widespread – but there needs to be some kind of catalyst to spark a reversal and it's difficult to envision anything positive on the Brexit front. Yen and euro shorts are shifting as carry trades unwind.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD trades around 1.1100 amid the Italian crisis, ahead of Fed minutes

EUR/USD is trading around 1.1100, in familiar ranges. Italian President Mattarella will explore if a new government can be formed after PM Conte resigned. The FOMC Minutes are eyed later in the day.

EUR/USD News

GBP/USD leans lower ahead of the Johnson-Merkel meeting

GBP/USD is trading below 1.2150, losing some ground. UK PM Johnson will meet German Chancellor Merkel in Berlin after the latter called for finding practical solutions on the Irish backstop.

GBP/USD News

USD/JPY: Bulls re-take 106.50 amid higher S&P futures, Treasury yields

Following a temporary reversal seen on Tuesday, the USD/JPY pair resumes the bullish momentum in Wednesday's Asian trading and regains the 106.50 level, tracking the gains in the US Treasury yields and S&P 500 futures. 

USD/JPY News

Top 3 Price Prediction Bitcoin, Ripple, Ethereum: Critical technical levels cryptos need to overcome after the summer slide

Late August is vacation time in the northern hemisphere – and cryptocurrency bulls may be at the beach as well. Tuesday's slide in prices lacks clear triggers and perhaps shows some fatigue or profit-taking.

Read more

Gold rebounds above $1,500, remains stuck in tight range

After closing the previous day at $1,506, the XAU/USD pair edged lower on Wednesday as the recovering market sentiment made it difficult for the precious metal to find demand as a safe-haven.

Gold News

Majors

Cryptocurrencies

Signatures