Hi, I'm Sebastian Schinkel. I look after Global Treasury here at OFX. We wanted to give you a quick update on recent market developments. It all started last week with a Donald Trump tweet about imposing tariffs to China. So on Monday, things got a little bit trickier after the Chinese government let the yuan depreciate to levels not seen since 2008, while gold spiked to levels not seen since 2013.
In the meantime, volatility spiked and the JPY continued trading stronger. On Tuesday, markets recovered even after the steep sell off from Monday. Volatility dropped. EOC held pretty well above that 67.50 level and the JPY also lost some ground. This was all due to the lack of retaliation from Chinese government to be made a currency manipulator. Central banks surprised markets on Wednesday. New Zealand cut rates by 50 basis points, which was not expected by the market. Actually the Kiwi was trading at 2% lower at some point during the day.
The Aussie dollar also reached a new low for the year and Thailand and India also cut rates. But, by the end of the day, markets recovered, equities and the US dollar closed flat, while the volatility index dropped back below 20. The Asian session opened up relatively stable on Thursday with EOC trading backup of 67.50. The Chinese government decided to fix the yuan above seven for the first time in more than 10 years. And while the market didn't react initially, we're still seeing a lot of interest for assets like gold, JPY, Swiss Franc, the typical safe haven.
We closed the week with Chinese inflation data, UK GDP and Canada unemployment. So keep an eye on the USD. It's trading relatively stable despite the market pricing, aggressive cuts by the Fed. Also the Euro, it's well supported at these levels apparently due to some current trade unwinding.
And obviously the safe haven assets, it's something to keep an eye on, especially the JPY, the Swiss Franc and gold. The market will also be paying special attention to volatility index. So if you have any questions, please reach out to one of our currency specialists. We're here to help 24/7.
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