Once again political tensions are providing more uncertainty for global markets, the US is said to be considering military action in Syria and President Trump advised that relations with Moscow have never been worse. The markets reacted predictably to the latest developments with Oil (WTI) surging to its highest level since 2014 and the equity markets falling once again, although certainly not to the extent that we’ve seen in recent weeks. The dollar remained on the back foot against most of the majors as they continued to consolidate in recent ranges.
In the US the CPI data came out close to expectation with just a slight miss on the headline MoM number (-0.1% vs 0.0%), this reinforced the expected growth levels that the Fed has been looking for and this message was reiterated in the Fed minutes which came out later in the session. They are confident in the strength of the US economy at present and expect inflation to return to 2% over the medium term but like the rest of the market are concerned by recent market volatility caused by geo-political factors.
At present, it feels like the markets really want confirmation on a number of geo-political fronts before we see any resumption of longer term trends. Volatility seems to be calming down from excessive levels that we’ve seen recently as the market waits firm progress on a number of fronts including the situation in Syria, the US – China Trade relationship as well as the long running Nafta and Brexit negotiations.
Looking ahead to today’s trading and once again investors will be monitoring the news wires closely for any progress on the above. It’s very quiet in terms of fundamental economic data releases and this should lead to more range bound trading conditions unless we see any escalation or change in any of the aforementioned geo-political situations. We do have some central bankers speaking throughout with day as well as the ECB minutes which could add some extra volatility including the BOJ’s Kuroda this morning in Tokyo and the BOE’s Carney much later in the day.