We saw another rally in the equity markets on Friday with the European sector leading the way as the EU managed to come to an agreement on immigration policy. The Euro jumped a quick big figure on the news and other risk currencies took advantage of the move to appreciate against the dollar with the Dxy finishing the day on the back foot back down at 94.60. Oil also remained in focus with the price continuing to climb despite talk of more increased output, President Trump once again took to twitter to urge his Saudi allies to increase production.
This morning we’ve already seen more volatility in the Euro as German politics dictates moves, also the Mexican Peso has strengthened as the election continues and polls show that we could see the first left wing leaders for 40 years – expect more volatility here as markets analyse the impact on a potential Nafta deal and the Mexican economy in general.
Looking ahead to the rest of the week and it could be a rough one again for global markets. We’ve got the deadline for US tariffs on Chinese goods on Friday and expect more talk on this subject and the trade situation in general before the key date. Risk trades recovered somewhat on Friday but expect downside pressure as we approach the end of the week and implementation of the tariffs. In Australia we have the RBA meeting and some key tier 1 data due, however expect risk sentiment to dominate the direction of the Aussie dollar especially with the market largely anticipating another forgettable rate announcement on Tuesday.