Global Themes

Global stock market volatility reigned and poured Thursday, trampling currencies with the highest sensitivity to the world economy like the dollar bloc trio from Australia, New Zealand and Canada. The tumult once again teed off in China as Beijing continued to guide its currency lower, signaling suspicion to the world that its economy may be weaker than previously thought. Meanwhile, China’s stock market took another 7 percent nosedive, triggering so-called ‘circuit breakers’ that halted trading and led to Beijing’s shortest session on record, reportedly lasting some 30 minutes. The U.S. dollar strengthened to one- and three-month highs against the kiwi and Aussie, while it notched 12-year peaks against the oil-battered Canadian currency. Sterling’s at mid-2010 lows against the dollar. Though stronger against some, the U.S. dollar fell against the euro and slipped to August lows against the safer yen.

EUR

Signs the ECB’s low rate policies may be helping its economy turn the corner helped the euro rebound from one-month lows against the dollar. Unemployment fell to a 4-year low of 10.5 percent, while German factory orders posted a second straight solid gain, up 1.5 percent in November. Though encouraging, what matters most to the ECB is inflation which remains stuck a little above zero, suggesting low to lower rates for the foreseeable future.

GBP

Same story, new lows for sterling which plumbed a June 2010 bottom. A U.K. rate hike in 2016 looks doubtful in the wake of subdued readings this week on the British economy. Moreover, uncertainty over Britain’s future in the EU amounts to another headwind on growth. Meanwhile, Britain’s Treasury chief today played up risks to U.K. growth from global weakness and instability.

NOK

Oil’s slide to new multiyear lows below $33 weighed on the commodity-sensitive Norwegian crown which hovered in reach of Wednesday’s 2002 lows.

AUD

The Aussie dollar took more negative news from China on the chin, crashing to three-month lows and through key support, down more than 1 percent. Beijing guided its currency lower Thursday, sending fears that officials, struggling to contain their slowing economy, are turning to their currency to help its dominant export sector.

CAD

An accelerating slide in oil did the same to the value of the Canadian dollar which hit fresh August 2003 lows. Focus today will be on a speech by Canada’s central bank governor. Should the remarks acknowledge or sketch a darker outlook for growth, they would open the door wider to a rate cut and reinforce the loonie’s downward spiral.

USD

The dollar enjoyed buoyancy against peers with the closest links to global growth like the Aussie, loonie and sterling. But overall the dollar was weaker as the previous day’s Fed minutes served as a catalyst to book profit on its quick start to 2016. The minutes depicted a somewhat higher bar to future rate rises with some officials voicing concern over low inflation. Meanwhile, it could be a steeper uphill climb to healthier inflation given the latest plunge in oil. On the data front, U.S. jobless claims improved 10,000 from 5-month highs, printing at 277,000. America’s monthly jobs report looms Friday.