Global financial markets experienced another relatively quiet and mixed day following a consistent pattern for this week. Strong US PPI data failed to drag equity markets out of familiar ranges and investors continue to look for fresh inspiration, US earnings season kicks off in earnest today and traders will be looking for them to add fresh impetus to topside momentum. The FX market did react well to the stronger data and the dollar is higher against all of the major pairs, the Dxy sitting back at 97.15 as the Asian session starts. Oil also moved strongly as it fell back off of recent highs on the back of increased US stockpiles and demand concerns, WTI now at $63.7/b and Brent at $70.8/b.
As mentioned above the global equity markets have experienced a relatively quiet last few days especially given the potential for volatility from risk and geo-political events this week with FX volatility now at a 5 year low. We’ve managed to get through an ECB meeting, FOMC minutes, a Brexit deadline and some significant tier 1 data releases with very little volatility across most of the financial spectrum. It does feel like the market is at a pivotal point and is looking for fresh direction, we’ve had a great start to the year for global equity markets but it seems like everyone and their mum are looking ahead and predicting a downturn. Central banks have almost unanimously back flipped over the last few months and are much more dovish with growth forecasts across the board are being pulled back, this dovish change has assisted risk and stock markets to continue grinding higher but many are questioning how much further can they go and how much impetus is left. The reporting season may give us a bit more insight as would concrete evidence of progress and maybe a deal in the US-China trade situation, for the moment however it feels the market is more cautiously pessimistic than optimistic and the winds of change could be set to blow hard at the financial markets in the near future.
Looking ahead at today’s trading sessions and there are a couple of important data releases due on the calendar but most investors will once again be closely monitoring for any fresh news to influence investor sentiment. Chinese Trade Balance data is due out in the Asian session and will probably be the most closely monitored release of the day, market expectation is for a $5.7bio print with Exports up 6.5% YoY and Imports 0.2% YoY. There is little else out in the way of tier 1 releases over the other sessions although the Prelim University of Michigan Sentiment will be a focus during the US session and the IMF meeting is set to finish up on the weekend.