Global financial markets had a mixed day yesterday as investors digested the latest update from Fed Chair Jerome Powell as he testified before the Senate Banking Committee. The dollar took a hit across the board as Powell confirmed that ‘muted’ inflation pressures warranted the Fed taking a patient approach to future policy changes, the Dxy dropping 50 points to trade under 96.00. However US stock markets didn’t react favourably to the comments with all three of the major indices finishing the day just short of flat. Sterling surged to the topside again as odds increased of a Brexit delay as PM May promised parliament a vote on the March 29 deadline if her latest deal proposal fails. Cable making new highs on the year above 1.3200 and EurGbp dropping to levels not seen since may 2017. Oil recovered some of it’s early week losses with WTI back above $55/b and Brent over $65/b and Gold rallied back towards 1330.00 in line with the dollars depreciation.
The market continues to trade in a cautious manner as it looks for certainty on a number of issues influencing sentiment with global trade and US-China negotiations plus Brexit still topping the list and other more localised issues affecting regional markets. President Trump is due to meet with North Korean leader Kim Jong Un in Vietnam today and although the summit is expected to be positive with regard to denuclearisation, little is expected in terms of market moving updates. Tensions remain high between India and Pakistan after India launched airstrikes into Pakistani territory and investors will be watching closely to see if the situation escalates further to the detriment of local markets.
Looking ahead to today’s trading and it’s another relatively quiet day in Asia with regard to economic data releases. We’ve had Kiwi Trade Balance numbers out already with an increase in the deficit coming through, -900mio against exp -300mio but there is nothing else due out in terms of tier 1 data for the rest of the session. The London time zone is equally quiet although traders will be looking at what Buba Preisdent Jens Weidmann has to say about the Bundesbank’s Annual report in a press conference in Frankfurt early in the day. The focus will turn back to the Fed Chair as the New York session begins and he enters day 2 of his Senate testimony, although first up attention will be drawn to north of the border with the release of the latest Canadian CPI data.