A slightly weaker finish on Wall Street and contagion risk spreading out of Turkey is setting the tone for European shares. The ECB has warned that some European banks could be harmed from the economic fallout in Turkey. Shares of banks with the most loan book exposure to Turkey are expected to come under the most pressure.
More generally, traders await the next move from the White House in the US-China trade war. A rally in Amazon shares pushed the Nasdaq up close to a new record but uncertainty around Tesla and its plans for going private were a drag. The strong showing in tech and US small caps demonstrates an isolated strength in the US markets that is not evident more globally.
UK GDP data out today could provide some respite for Sterling, if it can come ahead of the low expectations of 1.3% y/y growth. GBPUSD hit fresh lows at 1.28 overnight as Brexit concerns and a dovish outlook from the BOE continue to plague the currency.
Later on there is inflation data from the US, which is expected to hold at a solid 2.3% y/y. The release could provide some movement in the short-term but in the context of 4% US GDP growth, it seems likely the rise in the dollar will be unperturbed.
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