Morning Markets: Pound routed, Asian shares tumble
- Germany: Factory Orders (0600 GMT)
- Spain: Industrial Production (0700 GMT)
- EU: ECB's Mario Draghi speaks at ECB statistics conference (0800 GMT)
- US: ISM Non-Manufacturing Index (1400 GMT)
The sterling selloff that began yesterday deepened overnight as the fragile, post-Brexit, low-1.30s regime shattered leaving the pound to tumble from just under 1.33 at Tuesday-s open to 1.2796 at around 0330 GMT.
The selloff came in the wake of Bank of England head Mark Carney talking up the benefits of a softer pound while delivering Tuesday's Financial Stability report. Carney's address boosted expectations of an imminent interest rate cut (Saxo Bank head of FX strategy John J Hardy called this one prior to Carney's speech) and left sterling longs with precious little to stand on.
Carney also cut the amount of capital it required banks to hold in reserve by £150 billion while the UK property market braced for impact with several large funds freezing £9bn in assets. This morning, several large banks were out with dire warnings, with National Australia Bank's Ray Attrill saying that "$1.20 is a not unreasonable target" for GBPUSD while Goldman Sachs pointed to "ample downside" still ahead.
In sync with the despairing tone surrounding sterling and following a soft US session, the Nikkei 225 opened at 15,427, a significant downward gap after Tuesday's pre-close heights at 15,675, and continued lower to 15,167 before recovering some of its value.
The Asian session also saw Australia's 10-year bond yield tumble to a record low of 1.849% while the ASX200 closed the day 0.60% lower at 5,196.60 after a Japan-mirroring afternoon rally from the lows at 5,148.70.
- Crude prices tumbled on demand concerns and plentiful inventories
- Wall Street declines and the slump in oil prices weighed on investor sentiment in Asia
- Nickel gave up much of its recent gains on high inventory concerns
- Asian markets fell as investors turned to safe-haven assets
- Shares took a sharp opening tumble in Tokyo on high yen worries and the oil slide
- The Nikkei 225 was down 3% at one stage before posting an afternoon rally
- Australia's 10-year government bond yield fell to a record low of 1.849%
- The S&P/ASX200 lost ground and closed the day 0.60% lower
- The pound slumped to lows not seen since 1985 against the USD, falling below $1.28
- Safe-haven bid sends USDJPY from overnight low around 100.60 to 101.10 area.
- Oil selloff boosting USDCAD after brief dip below 1,30 overnight
- EURUSD recovers from 0330 GMT lows in tandem with sterling
- AUDUSD rising towards 0.7450 area; AUDNZD gains 0.5%
From the Floor
Yields ice over. "Japan's 20-year yields hit zero for the first time overnight," says Moltke-Leth
Cable caves. "We are seeing remarkable new lors in sterling as well as USD strength," says Hardy
Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.
The world post-Brexit could curb industrial output in the EU, but for now a second-quarter bounce is expected in Germany, Europe's top economy, says James Picerno.
View Saxo Bank head of FX strategy John J Hardy's latest webinar in which he gives his take on the massive movements seen in foreign exchange markets.
Gold may be heading for a near-term pause, says James Woods, in his Global Market Report, which includes the outlook for the S&P/ASX200, S&P500, Nikkei 225 and natural gas.
The direction of EURUSD will be determined by whether the current risk-off mood gathers momentum, explains Max McKegg in this trade view.
The volatile silver rally has apparently resumed as risk-off sentiment sweeps markets. What's next for the junior precious metal, asks Saxo head of commodity strategy Ole Hansen?
Morning Markets goes out on the TradingFloor platform at 0700 GMT, Monday to Friday.
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