There is some very rowdy trading taking place in the currency markets and gold on the heels of the continued plunge in the Turkish lira.
August 10 (King World News) – Here is a portion of what Peter Boockvar wrote today as the world awaits the next round of monetary madness: I admit, I didn’t fully think thru the potential broader implications of the economic and financial mess that is Turkey. I initially believed it was of their own political making and now exaggerated by the liquidity drain that is going on via higher US rates, QT and the reduction in QE from the ECB and BoJ as accidents are more prone to happen when central banks tighten (less QE is a form of tightening I believe). The Turkish lira is down 7.5% today after plunging by 5% yesterday. Their 10 yr yield is up 110 bps today to 20.8%.
It was the FT today that highlighted the ripple effects this could have and that the ECB is now watching. “The lira’s drop came amid increased concerns from the eurozone’s chief financial watchdog about the exposure of some of the currency area’s biggest lenders to Turkey, chiefly BBVA, UniCredit and BNP Paribas.” All three have “significant operations in Turkey” and are “particularly exposed, according to two people familiar with the matter.”
UniCredit is down 3% and lower the for the 4th day this week. BNP low lower by 3.5% and down for the 7th day in the past 8. The broader Euro STOXX bank index is down by 2.4% and is just a hair above the weakest level since December 2016.
About The Gold Market
King World News note: It is also interesting that even though the US dollar surging today, the price of gold is relatively flat. This could be an indication of broader contagion as a result of the plunge of the Turkish lira. If contagion take hold it will be extremely positive for the price of gold.
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