This week, in the US, stock prices in the oil and gas sector fell to all-time lows. We are seeing semiconductor Manufacturing International Corp shares plunge in HK trading following disappointing earnings and analyst downgrades. Meanwhile in Europe, the British telecommunications provider TalkTalk falls 17% after profit warning.
The UK Chancellor of the Exchequer Hammond is set to deliver his first Autumn budget tomorrow, and it could be his last. The UK government is fragile. Infighting is notorious. It appears the hardline Brexit camp does not trust Hammond. A cabinet reshuffle is widely rumored, and Hammond seems vulnerable. Prime Minister May, who also initially was in the Remain Camp, is said to regard Hammond suspiciously.
Weekend elections in Chile offered up a negative surprise. Former President Pinera won, but his margin of victory was small and he goes to the second round in a weakened state. Still, we caution investors not to get too negative as a result of the elections. Continue reading
EM FX ended the week firm, and capped off a good week overall. Best performers last week for ZAR and KRW, while the worst were TRY and IDR. Until we get higher US rates, the dollar may remain under modest pressure. This would help EM maintain some traction, though we remain cautious. Continue reading
Last week, we warned that dollar’s downside correction to its two-month advance was not over. It slipped further against the euro, yen, and sterling, while it strengthened against the dollar-bloc currencies. The outlook remains mixed for the week ahead, making it difficult to discuss the dollar in general.
The Dollar Index is heavily weighted toward the complex of European currencies. Two of the US main trading partners, China and Mexico, are not even included. Yet it frequently is used as a broad gauge of the greenback. The recent pullback saw it push through the 38.2% retracement of the rally (93.55) that began from the year’s low set on September 8 (~91.00).