The markets finished last week on the front foot once again with the US equity indices all finishing in positive territory on Friday, this was mainly on the back of improved sentiment on trade tensions with the US and China set to get back to the negotiating table. The dollar dropped off again over the course of the trading day in a reversal of the recent haven trade with the commodity currencies benefitting more than most. Aussie and Kiwi in particular bounced well off of recent lows and look set to continue to trade in line with market risk sentiment as the week progresses.
It’s a relatively quiet week in terms of fundamental data releases ahead but the market is still wary of further volatility across the products. Turkish markets are closed this week along with most middle eastern exchanges but after last week’s run on the currency and no diplomatic solution in sight between the US and President Erdogan, traders will be keeping a close eye on the Lira which could move even harder in reduced liquidity conditions. Naturally this vigilance will also flow over to other emerging markets currencies with many still sitting at vulnerable levels.
There’s a strong central bank focus this week with both the RBA and Fed due to release the minutes from their recent meetings and then the annual Jackson Hole Economic Symposium kicks off at the end of the week. Sentiment looks set to dominate flows again this week and investors will continue to monitor the news wires closely for any change, expect more comments on the upcoming China-US trade talks and volatility to come on the back of them. The announcement of talks has been rightly greeted with a positive slant by the market, but participants will be aware that there is a lot of ground to be made up in negotiations and with the Mid terms getting closer, there might be little in the way of conciliatory rhetoric from the US side.