Summary:
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Stock indices little changed at the start of the week
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Turkish Lira comes back under pressure
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USD drops back despite 10-year yield rising back to 3%
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SEK gains following Riksbank minutes
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Crypto moves lower with Ethereum the biggest loser
The start of the US session has seen some interesting divergence as far as US indices are concerned with the US100 hit with some early selling while the US30 has pushed higher. Unsurprisingly this has left the US500 a little directionless although having said that it is lower on the day and has dipped to the 2900 level. Speculation surrounding additional US tariffs on Chinese imports is rife with a tariff-related tweet from Trump around lunchtime doing little the quash the rumours.
The Turkish lira surged last Thursday after the CRBT announced a larger than expected interest rate hike but new doubts have send it lower on Monday. USDTRY gains 2% and EURTRY 2.6% on Monday after revelations that Erdogan seeks a nationalization of a 28% stake in the largest listed domestic bank (Isbank) that is currently owned by an opposition party. The move would be seen as another sign of unpredictability just in time when the lira needs a period of calm.
The yield on the US 10-year bond has reached its highest level since May today, and in doing so moved back above the big round number of 3%. For the last 7 years the market has struggled to gain traction above the 3% level with pushes into this region often marking highs. The TNOTE has been seen previously as exhibiting an inverse correlation with the US dollar, with a lower TNOTE price indicating higher US yields which is seen as positive for the US dollar. This was particularly evident in the aftermath of the 2016 US election when the TNOTE fell strongly while the US index (USDIDX on xStation) rallied. Since then however the relationship has noticeably weakened and at present the relationship has actually been a fairly good positive correlation.
The Riksbank minutes from the meeting held on 5 September showed that a majority of members agreed that monetary tightening would be needed in the nearest future, there was no the precise date when a hike cold take place though (the Swedish central bank signalled that it could happen either in December or February). One of the most interesting points being worth mentioning was a remark coming from Governor Ingves who said that “with higher growth and inflation than in the Eurozone, it seems natural to also have a higher interest rates in Sweden than that of the ECB”. The SEK is rising on the day with gains of 1.4% seen against the US dollar and 0.9% against the Euro.
It’s another bad day for crypto bulls with declines seen in 4 of the 5 markets, with Dash the only one in the green at the time of writing. Ethereum is the worst hit and lower by almost 7% as the market threatens to fall back below the 200 level. Bitcoin is lower by around 4% and the market looks in danger of breaking below its key longer term support around the 6000 level.
