After two days of sharp declines over Thursday and Friday of last week, the euro took some reprieve on Monday. EURUSD is however re-heading south so far this morning, with the currency pair currently trading at 1.14 just off yesterday’s highs of 1.1432.
Fears that the woes of a spiraling Turkish lira could somehow drag down some European banks with it have raised concerns for the EZ as well.
Turkey is suffering a situation that will not be easy to undo. The country is running twin deficits (a fiscal and current account deficit), and President Erdogan’s influence over monetary policy has not helped the Central bank gain any trust points, especially when Turkey needed an interest rate rise to counter rising inflation. Politically turning to the IMF for fresh capital could turn out to be very difficult as well. Trump’s doubling of tariffs on Turkey was just the straw that broke the camel’s back.
US Dollar has been supported against the Japanese Yen as the currency pair enters what may be its second consecutive day of gains. USD has for sure been helped by rising yields as emerging economies tend to dig into their foreign reserves in times of crisis, selling US treasuries, dropping treasury prices but in the process also raising their yields.
Performances have been mixed in Asia’s major equity indices this morning as some of the major indices managed to recover from previous losses on Monday. The handover from US stocks was negative at Monday’s close. Later today we have EZ GDP figures for the second quarter.
