Peter A Rosenstreich
Swissquote Bank Ltd
Fear of a Turkish currency crisis is now fading. Threats of additional US sanctions on Turkey have had a muted effect; TRY is regaining lost ground. Most currencies are higher against the USD as contagions and risk aversion diminished. The US and USD remains the talk of the town but the panicked flight to this safe-haven has ended. Global equities firmed, led by improvements in the S&P 500 on stronger Q2 earnings. It might be a bit too early to throw in the towel on contagion, but all the indicators are positive.
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Tactically speaking, now might be a good time to snap up bargains. Latin America looks especially good, given BRL and MXN are caught up in geopolitics. We expect trade risk to fade into the fall. Currencies have been oversold. While US is white hot we anticipate a slowing in 4Q, allowing emerging markets to rise. Despite the hype, we don’t see a significant change in long term geopolitical relationships (the EU/USA was already in the process of pushing Turkey away). Baring a significant deceleration in China growth, credit issues or rapid repricing of US interest rates, we see further appreciation of emerging market and G10 currencies against the USD.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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