The relief rally from that latest episode in the US–China trade war continued throughout yesterday’s sessions with US stock markets once again leading the way, both the Dow and S&P hit new record highs. ‘Risk on’ sentiment and trade flow has been prevalent in the markets and the feel good factor was helped by a report that China is preparing to cut import tariffs for the majority of it’s trading partners. The dollar has taken a significant hit the course of the week as the positive sentiment drives funds back to other currencies with the Dxy now trading at sub 94.00 levels, this despite the US 10 year yields trading up to 3.09% overnight and a stronger print in the Philly Fed Manufacturing Index.
Sterling continued it’s strong run overnight as retail sales data beat expectations well (0.3% vs exp -0.2%) and interesting managed to shrug off a some negative news on the Brexit front as EU leaders rejected Theresa May’s initial separation plan. The pound has been generally swaying in the wind of Brexit sentiment since the vote and fundamentalists will find it refreshing that the currency maintained it’s bid tone in that environment as in the recent past we’ve seen those sort of comments send the cable and crosses tumbling.
Aussie and Kiwi also had good days as they continued to gain in the positive risk environment, the Kiwi move was bolstered by a much better than expected GDP number with yesterday’s release showing that they had their best quarter in in two years. Aussie now back to just shy of 0.7300 having dipped under 71 cents just over a week ago.
Looking ahead to today’s trading and it looks like we’re set for more of the same as Asian markets are due to open in the positive and investors will be looking to jump on the positive sentiment for as long as it lasts. There’s not much in the way of tier 1 economic data releases today, until the Canadian CPI later, so the focus will be on sentiment with investors continuing to monitor the main players for any fresh catalyst that could spoil the party. It’s Friday, so there’s a chance of end of the week squaring flows to temper the recent moves but for the time being, let the good times roll !!