Still Reluctant To Take Euro Above $1.19 But Sterling Remains Unloved

Overview: Yesterday's roller-coaster price action has not had much impact on today's activity. The slide in US equities after early gains failed to prevent Japanese, Chinese, and Hong Kong equities from advancing, though other markets in the region were not as resilient. It is the first back-to-back weekly loss of the MSCI Asia Pacific Index since May. Europe's Dow Jones Stoxx 600 is flat to slightly higher, but the weekly gain is offsetting the lion's share of last week's decline. It has been a volatile week for US shares, and while the S&P 500 is called higher, it is nursing a 2.5% loss in the past three sessions after dropping 2.3% last week. It is the first two-week decline since the end of April./beginning of May. European benchmark yields are 2-4 bp lower, while the US 10-year sits near 68 bp, a few lower than a week ago. The dollar is weaker against most of the major currencies. The yen and sterling are exceptions. The dollar is in less than a quarter of a yen range above JPY106.05, and sterling has been knocked by the Brexit developments. Itis roughly a 3.7% decline this week is the largest in six months. Emerging market currencies are mostly firmer, though Turkey, Korea, and Indonesia are struggling.  The JP Morgan Emerging Market Currency Index is virtually flat so far here in September. Gold is steady after reversing lower from $1966 yesterday and settled about $20 lower. Oil is a little changed today. October WTI is continuing to trade within Wednesday's range (~$36.15-38.45). It is off around 6% this week after tumbling 7% last week, for the largest decline in April.  

Asia Pacific

Abe's most likely successor, Suga, who is expected to be confirmed at LDP leader and Prime Minister next week, appeared to walk back comments made yesterday seemingly to endorse another unpopular hike in the sales tax. Today he indicated that no such increase will be needed in the next decade. Part of Abe's agenda pertaining to strengthening Japan's military capabilities is unfilled but among the departing Prime Minister's last efforts is to secure preventative capabilities to take out an adversary's missile base. Separately, Japan's August producer prices were 0.5% lower than a year ago, improving from -0.9% in July. Another increase is likely in September before the base effect works against it in October. In October 2019, Japanese producer prices jumped 1.1%. 

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Read more by Marc on his site Marc to Market.

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