EUROPEAN CLOSING REPORT: FRIDAY – 10TH – AUGUST – 2018 August 10, 2018 at 04:31PM




FRIDAY – 10TH – AUGUST – 2018

The Turkish Lira went into freefall this afternoon with Usd/Try surging to a new record high of 6.87 after US President Trump doubled steel and aluminium tariffs. Turkish President Erdogan only added to the turmoil
with a notably nationalistic and combative speech in which he called on citizens to exchange their Dollars and Euros for the Lira. Perceived safe-haven assets rallied in response with US 10-year government bond yields falling over five basis points while the
Japanese Yen rose to the top of the G10 pile. The Greenback has also found some upside against most of the majors with the Dollar Index at a one-year high and taking a firmer grip of the 96 handle after some mixed CPI data – headline CPI was a touch softer
than expected at +2.9% (f/c. +3.0%) while core was slightly stronger at +2.4% (f/c. +2.3%). The Canadian Dollar advanced after data showed a sizeable employment jump of +54.1K (f/c. +17.5K) in July as the unemployment rate dropped two-tenths to 5.8% (f/c.
5.9%). In equity space, European bourses have extended losses slightly this afternoon with bank stocks still showing notable underperformance amid contagion fears (FTSE -1.0%, DAX -1.8%, CAC -2.1%). We also saw a firmly lower open on Wall Street where Intel
shares have seen a sharp drop after a downgrade at Goldman Sachs. Oil prices have surged with US crude futures up over 1.5% at the highs while spot gold has added 0.2%. Still to come today, the USDA WASDE crop report at 17:00 BST, Baker Hughes rig count at
18:00 BST and US monthly budget statement at 19:00 BST.

Key Headlines/Data:

*  UK Finance Minister Hammond said the chances are that they will get a Brexit trade deal. He also suggested they are considering an Amazon tax for online retailers.

*  Russian President Putin has discussed possible US sanctions with the Security Council.

*  Turkish President Erdogan said they will respond to those who star an economic war against Turkey. He urged citizens to convert FX reserves and gold to the Lira

*  US Consumer Price Data (Jul):

  • CPI M/M +0.2% versus +0.2% expected, previous +0.1%
  • CPI Y/Y +2.9% versus +3.0% expected, previous +2.9%
  • Core CPI M/M +0.2% versus +0.2% expected, previous +0.2%
  • Core CPI Y/Y +2.4% versus +2.3% expected, previous +2.3%

*  US Real Earnings Y/Y (Jul) -0.2% versus +0.1% expected, previous +0.1% revised to +0.3%

*  Canadian Unemployment Rate (Jul) 5.8% versus 5.9% expected, previous 6.0%

  • Employment Change +54.1K versus +17.5K expected, previous +31.8%

@realDonaldTrump – I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum
will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!

*  UK NIESR GDP Estimate (Aug) +0.5% versus +0.4% expected, previous +0.4%



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