EUR/USD – is moving slightly down this morning after moving up yesterday on slightly improved market sentiment. ECB President Draghi expects the Brexit to result in a reduction of the GDP of the Eurozone of 0.5%. In addition he warns of currency wars to devaluate currencies in an attempt to boost the economy.
USD/JPY – moved a bit up as the BOJ and the Japanese government are to meet and discuss the Brexit vote and the fallout. This in turn is leading to some expectation of intervention by the BOJ either on the markets directly, or by increased stimulus. So far the psychological 100 level is still holding, and as the BOJ hasn’t intervened in the markets, the chances of them doing so is low. Nevertheless extra stimulus always is an option, but we have been down that road before and got disappointed.
GBP/USD – moved up yesterday but is already moving down again this morning. There is nothing really optimistic out of the UK at the moment as said yesterday as well, so any move up should be carefully watched for now, unless we hear some fundamental changes. We also have to take into consideration that, with an expected recession, the BOE is likely to step in and act by either lowering interest rates, or expand monetary stimulus or both. In any case, both actions should in principle lead to a further weakening of the GBP.
USD/TRY – is so far not seeing a reaction to the latest terror attack in the country. However, the attack, on an international airport, cannot be good for the already suffering tourism industry, which is an important part of the economy.
S&P 500 – moved up sharply yesterday and is currently continuing to move higher. However, we are seeing currencies and commodities turn around again, so we will have to wait and see if the S&P will be able to hold onto its gains.
Gold – with the correction in the market and the relative calm that comes with that we saw gold move further down, although it was able to stay above the 1300 level. As the markets are turning around again, we see gold also edge higher.
Oil – has moved considerably up yesterday after being able to convincingly conquer the 47 level. Obviously the change in sentiment was important, as was the weakening USD. In addition the crude stock saw a larger drawdown than expected with nearly 4 million barrels. However, last week we also had a large number in the crude stock, but the actual inventories showed only a small drawdown, so we will wait to see this afternoon. I mentioned yesterday the possibility of a strike in Norway and we have discussed the events in Nigeria and Canada as well, which caused oil to move higher in recent weeks, but which appear to become less relevant. One thing I didn’t mention yet, is the situation in Venezuela, which is lingering already for quite a while. Production there is dropping due to problems producers are having as they are struggling with power outages for one. Venezuela is also one of the countries that was pushing the hardest for a production cut by OPEC as it is really struggling.