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Turkish Lira pares losses as markets begin to calm

By Jake Trask

GBP/USD has pushed back up through 1.28 this morning as the market panic over Fridays run on the Turkish lira starts to dissipate. Turkeys central bank yesterday issued a message that it was prepared to offer the country’s banks all the liquidity they needed in an effort to keep them lending. The bank stopped short of raising interest rates to shore up the currency which depreciated around 20% against the dollar between Friday and Monday. The sharp devaluation in the Lira will likely only compound the countries inflationary woes which currently sits at 15%. Markets will be on the lookout for further measures from the bank and comment from President Erdogan over the next few days however it appears the worst of the panic is over (for the time being). USD/TRY which peaked around 7.1 yesterday is now down to 6.53 illustrating how some sense of calm is being restored. Away from Turkey we have some top tier data from the UK to digest later this morning. UK Average Earnings Index 3m/y is expected to remain at 2.5% with no change predicted in the level of unemployment (4.2%).

The dollar has given up some of its gains from the past few days as some calm is restored to the FX markets. EUR/USD which had dropped below 1.14 is back above the big number at 1.1415 and USD/JPY is back above 111 after touching a one month low first thing yesterday. With no data from the US until tomorrows Retail Sales figures, market focus will likely remain fixed on Turkey throughout today.

There is finally some Eurozone data to pick over this morning with Flash Q2 GDP numbers and German ZEW Economic Sentiment survey due at 10am. To confuse matters somewhat, the Flash reading, which used to be the first reading of GDP is now actually the second reading, as “Preliminary Flash” is now the term for our first look at the bloc’s economic performance. The 0.3% growth shown last month is expected to remain unchanged and there is predicted to be a slight uptick in optimism from the ZEW survey from -24.7 to -20.1. GBP/EUR has risen to 1.1210 as some risk trade re-enters the market.

AUD/USD traded as low as .7251 earlier this morning as the turmoil in Turkey was compounded by some soft economic data from China. Fixed Asset Investment and Industrial Production numbers both missed target at 5.5% and 6% respectively adding extra downward pressure to the Aussie. The recent implementation of tariffs from President Trump on Chinese exports has aided a drop in local stock markets of over 20% this year as the tit for tat moves from either country are seen affecting China more than the States. These soft numbers will do little to dispel that theory. Tonight sees Wage Price Index q/q from Down Under with a quarterly rise of 0.6% seen by investors. GBP/AUD is at 1.7630.

USD/CAD is back under 1.31 this morning as the Lira starts to pare some of its losses seen since Friday. USD/CAD is currently around 1.3085 with little data of note due from Toronto until Fridays CPI number. GBP/CAD trades at 1.6760.

NZD/USD remains under .66 this morning after failing to get a foothold above the big number during the Asian session. A slow return to risk trade may benefit the Kiwi as long as the liras recovery continues and there are no confrontational statements from Presidents Trump or Erdogan today. GBP/NZD is at 1.9415.