Corrective pressures grip the capital markets today, helped by the easing of the selling pressure on Turkey, but its more a respite than a relief as no new policy initiatives are behind the lira’s upticks. The implication of this is that it is unlikely to last. In fact, the dollar’s low in early Europe a just above TRY6.41 after trading a little above TRY7.23 yesterday may be about the most that can reasonably be expected. And not all countries are participating. India’s rupee and Indonesia’s rupiah fell to record lows, spurring reports of central bank intervention and only then did they recover.

Favorable European economic data was insufficient for the euro to hold on to even modest upticks. The euro had retested yesterday’s highs near $1.1430, and stronger than expected growth from Germany (Q2 GDP 0.5%) and Q1 was revised up (0.4% from 0.3% failed to help it sustain the gains. German GDP helped spur an upward revision to the EMU GDP to 0.4% from 0.3%. Separately, the August ZEW survey, both the assessment of current conditions and expectations also improved more than expected. The euro found bids $1.1380, and corrective forces remain intact.

Nor was the UK data enough to deter selling into sterling’s gains that had carried it through yesterday’s high (~$1.2790) and a little past $1.2825. Sterling fell to nearly $1.2765, ahead of support seen near $1.2740. Employment growth slowed in the UK to 42k (3m/3m) from 137k. This is the slowest period since last October. `Separately, regular earnings grew 2.7%, as expected, though the May reading was revised to 2.8% from 2.7%. The unemployment rate fell to 4.0% from 4.2%. 

On the other hand, disappointing Chinese data could not send the yuan lower, though Chinese equities are a different story. The MSCI Asia Pacific Index rose nearly 0.5%, but, Chinese stocks slipped lower. The yuan both onshore and offshore is a little firmer. China’s data-retail sales, industrial production, and fixed asset investment-were all softer the than expected. This followed the slower lending and money supply figures. The anticipation and implementation of the trade tensions may have contributed, but a broader slowdown was underway. Just as importantly, Chinese officials have already signaled a policy shift toward greater economic support.