Emerging market currencies fall again on weak Chinese data

Enrique Díaz-Álvarez29/Σεπ/2015Currency Updates

Markets shifted to a clear risk averse mode yesterday.

It started with the disappointing news regarding China’s industrial profits, down considerably more than expected, and continued as the rout in trader Glencore took an ugly turn (down another 30%) and spooked investors worldwide. Continued fallout from Volkswagen’s cheating scandal certainly did nothing to help the atmosphere.

Traditional haven currencies (such as the Japanese Yen and the Swiss Franc) rallied, while commodity dependent G10 currencies (such as the Australian Dollar, New Zealand Dollar and Norwegian Kroner) sold off and emerging market currencies continued to fall.


Sterling held its own yesterday against the US Dollar while falling modestly against the Euro, in a day without significant macroeconomic releases on either side of the Channel.

A string of mostly second-tier data releases in the UK this morning may cause moderate volatility in Sterling. House price growth from Nationwide, the latest round of mortgage approvals and the CBI distributive trades survey are all worth looking out for.


The Euro rallied modestly against both Sterling and the Dollar in the absence of major news from either data releases or monetary policy developments. The common currency appeared to shrug off Catalan election results that showed separatist just shy of 50% of the vote, with one important faction announcing that it would not pursue unilateral independence in the circumstances.

Consumer confidence data for September will be the focus in the Eurozone today when released at 10am London time. Having reached an eight year peak in March this year, confidence among consumers in the Euro-area has since been on the decline following concerns of a global economic slowdown and, more recently, the ongoing refugee crisis in Europe.


Personal income and spending data for August in the US were quite positive. Spending climbed more than expected and there were revisions to the previous months as well.

FOMC member Dudley restated Yellen’s message that interest rates will be hiked before the end of the year. In response, the Dollar put on a mixed performance, dropping modestly against safe haven currencies but rising against major emerging market currencies.

An unusually quiet day is expected across the pond today. Consumer confidence data at 3pm UK time will be the main data release and will steal most traders’ attention.

Expectations for the timing of a Federal Reserve interest rate hike will continue to dominate volatility in the US Dollar this week. A strong labour report at the end of the week, particularly in the nonfarm payroll number, will heap further pressure on the FOMC to increase rates at either the October or December meeting.

Rest of the world

More pain for emerging market currencies yesterday. They were rocked by the dramatic falls in miner Glencore and the resulting flight from risk, with the JP Morgan basket of emerging market currencies down another 0.6%.


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Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.