Euro and British Pound Remain the Strongest

Market Reviews

Euro and British pound are the strongest major currencies for today, while Swiss franc is trading as the weakest. German 10 year bund year is rising 0.023 to 0.535. The single currency was supported by a weakening of concerns that Turkey's problems could spread to the euro area. Also, the euro received an impetus from data on German wholesale price index (WPI).

On a monthly basis, German wholesale prices rose by 0.3% in August, after rising 0.1% in July. The WPI increased by 3.8% year-on-year after an increase of 3.6% in July. This was the fastest growth in wholesale prices since April 2017.

Major European stock indices are trading higher today. DAX gained 0.21%, CAC increased by 0.18% and FTSE rose by 0.55%. Earlier in Asia, Nikkei closed up 0.29% and Singapore Strait Times rose 0.53%. China Shanghai SSE dropped by 1.62% to close at 27499.39.

The Federation of German Industries (BDI) lowered 2018 GDP growth forecast to 2.0%, down from prior estimate of 2.25%. Also, export growth is expected to be 3.5% in real terms, down from prior forecast of 5%.

Peter Praet (ECB Chief Economist) said today that “clearly we see progress in the underlying (prices), what is behind the inflation process.” However, he stressed that “it’s a long process and conditioned on very easy monetary conditions.” Yesterday, ECB President Mario Draghi stated, that “domestic price pressures are strengthening and broadening”. However, Praet talked it down and said there was “nothing new” in Draghi’s comments.

BoJ Governor Haruhiko Kuroda maintained the pledge that “BOJ will continue to make its utmost efforts to firmly support corporate activity, taking into account economic, price and financial developments.” Kuroda also said that the central bank is now at a stage that the benefits and side-effects of the ultra-loose monetary policy must be considered in a “balanced manner”. He pointed to strengthening in the recovery and pickup in wages and prices.