Asian stock markets look set to open on the front foot again today as optimism for global trade slowly creeps back into the market despite a tweet from President Trump advising that he doesn’t think the US is under any pressure to sign a deal with China. The dollar continued it’s recent run back down as the positive momentum continued into the currency markets and another miss, this time in the US CPI data assisted the move. Oil retreated nearly all of its recent topside run as the severity of Hurricane Florence pulled back slightly, leading to hopes of a much reduced impact on US gasoline operations. Both the ECB and BOE played fairly predictable games at their rate announcements with no change of rates and similar messages to the market that we’ve heard before.
The Turkish Lira and other EM currencies got a shot in the arm as they Turkish Central Bank raised rates by a much higher than expected 625 basis points, this is sharp defiance to President Erdogan’s well documented thoughts on the subject. Emerging markets continue to be a focus for investors and last nights strong rally in the Turkish Lira did help the sector as a whole. However, the main catalyst for the rapid depreciation of the majority of EM currencies has been the US China trade tensions and despite a bit of light coming at the end of the tunnel in the form of potential fresh talks, President Trump seems keen to stay on an aggressive front foot.
Investors are likely to remain wary while the market lacks certainty on this issue and this was well represented in the moves in the Aussie last night. Despite most of the main recent influencers for the currency coming good in the last few sessions, including strong employment data yesterday, the Aussie struggled to rally much through 0.7200 last night and as the main major currency risk proxy I think these moves are indicative of market caution. The market is looking for much more in the way of reassurance on a number of fronts before we are likely to see significant rallies in risk currencies against the greenback.
Looking ahead today’s trading sessions and market focus will be on the latest Chinese Industrial Production numbers in the Asian session. We’re due to hear from Bank of England governor Carney during the London day and then the focus data wise will turn to the US for the release of the Retails Sales monthly numbers. Once again sentiment looks set to dictate market moves and investors will be looking to the news wires for any new input to the various trade issues that could ignite the next market move.