Peter A Rosenstreich
Swissquote Bank Ltd
As emerging-market currencies quake, now could be an opportunity to bargain hunt. Turkey has bounced back: the market has lost its appetite for pushing TRY further, as USD/TRY 1 month at-the-money volatility stands at a whopping 60. Argentina, Mexico and South Africa have regained lost ground, decelerating the rabid risk-off trade seen Monday. Argentina raised interest rates by 5% (seven-day notes at a record 45%) and announced it will sell USD 500 million to support the peso.
President Trump has shown his trademark pattern: threaten, and then back off. Overnight, top national security aide John Bolton warned Turkey there would be no negations until the US pastor is released. Despite pugnacious position by both sides, efforts are being made to reduce tensions. It’s the only meaningful evidence to forecast USD/TRY’s next move. Besides, a juicy 17.75% in nominal rates will attract speculators who view the current calm as a scalping opportunity.
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Pound still soft
UK unemployment should fall further toward 4% (expect 4.1%). Wage growth should stagnate at 2.7%. Rising inflation should give the Bank of England confidence to raise rates in August. However, European growth concerns and Brexit uncertainty should keep the BoE sidelined for the rest of the year. We remain negative on sterling.
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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