World markets are a sea of red as world growth fears have moved to the front of investors’ minds. Overnight, New Zealand became the latest country to cut interest rates, slashing its headline rate 25 basis points and signaled that more easing is possible should China’s economy slow further. The “kiwi” dollar was down 2% at one point as so-called “commodity currencies” were sold in full force. The Canadian dollar is testing new lows, one day after its central bank held firm on rates and offered a slightly neutral outlook on domestic and global growth. The Brazilian dollar is the biggest loser today, down by more than 3% on rumors of central bank intervention. Some banks are now eyeing an exchange rate of 4.00 as the country’s debt rating was cut to “junk” status. One day after an 8% gain, Japan’s Nikkei lost 2.7% today as the Hang Seng and Shanghai were both down 2.6% and 1.4% respectively. With one week until the next FED meeting, it is looking more likely there will be no movement in US rates.
The European session was slightly more positive, but not by much. The British economy remains the one shining light as UK home prices rose at the fastest pace in 1.5 years and underscores why the Bank of England remains one of the few central banks even considering a hike in rates. The euro is drifting higher today despite disappointing French production in an otherwise very quiet European session. Rumors continue to float that the European Central Bank could extend QE into 2017, which should provide a bit of tug-of-war for EURUSD in the event the FED strikes a more cautious tone at their next policy meeting. German and Spanish inflation close out the data calendar tomorrow in Europe, both are unlikely to impact price action too much.
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