Analysts at Westpac, in a market wrap, explained that risk aversion prevailed in Friday NY trade and extended at Monday's open, with equities and US bond yields falling.
"The main focus was the collapse of the Turkish lira and the potential ripple effects across Europe and elsewhere. AUD/USD slipped under 0.7260 early Monday, to lows since Jan 2017. Today's data calendar is light."
"The Turkish lira fell a staggering -13.7% Friday and a further -9% in the first 2 hours of Monday trade (with of course only Australia and NZ open). The currency had been weakening for some time amid concerns about Turkey’s economic policies and the diplomatic dispute with the US over a detained American pastor, and news that President Trump announced higher tariffs on Turkish metal imports added to the lira slide."
"In Friday afternoon Sydney trade, the Financial Times claimed the ECB was worried about the exposure of European banks to Turkey. EUR/USD fell from 1.1535 in Sydney Fridaymorning trade to 1.1370 early Monday – the lowest since July 2017."
"Equity markets fell in Europe and the US, as investors priced in danger of the Turkish meltdown spilling over into other markets. AUD/USD was affected by the risk aversion, falling from 0.7370 at lunchtime Friday in Sydney to 0.7251 very early Monday – the lowest since January 2017. NZD/USD similarly fell from 0.6615 to 0.6557 – the lowest since February 2016. AUD/NZD fell 80 pips over the day to 1.1065."
"USD/JPY starts the week around 110.50, down 0.5%, the yen playing its usual safe haven role. The Swiss franc did likewise, rising about 1.2% against the euro."
"US data had little impact. CPI rose 0.2% in July, for an annual gain of 2.9% - both as expected. The core version rose 0.24% in July and 2.4% annually (vs 2.3% expected) – a decade high, and continuing the acceleration seen so far this year."
"Canada reported a 54k jump in employment in July, well above consensus of 17k and with the unemployment rate dropping from 6.0% to 5.8%. But the details were less impressive for this volatile series – full-time jobs dropped -28k. CAD was weaker overall in the poor risk environment, -0.7% against USD."