Global markets continued to drive higher during yesterday’s trading as investor sentiment remained bullish with further talk of progress on trade talks between the US and China and the Fed’s minutes confirmed a more dovish FOMC as we move into 2019. The market has been buoyed since Friday by those factors, as well as further internal stimulus in China and equity markets have reaped the benefit of the improvement in risk appetite, indices once again posting good gains overnight. The Bank of Canada kept rates on hold as was widely expected and indicated that this may be the case for the rest of the year and Oil continued on its recovery run again yesterday with WTI trading back above $52/b and Brent through the $60b barrier.
The dollar is now firmly on the back foot with the Dxy trading back near 95 as the currency market continues to react to what has been a relatively sharp turnaround in Fed rhetoric and guidance over the last couple of months. The major currencies have bounced well against the greenback but EM’s have probably taken even more benefit from the ‘risk on’ environment with Asian EM’s trading a much stronger levels on the back of Chinese stimulus and a more positive global trade outlook. Traders are happy to continue to look for levels to sell the dollar but will also be aware of how fickle sentiment has been over the last year and will be protecting short positions accordingly whilst also preparing for any sharp reversals.
Looking ahead to today’s trading and with little on the economic calendars as we move through the day, bulls will be hoping for more of the same from the market. Focus will move to the ECB in the London time zone as we have the latest Monetary Policy Meeting Accounts and much later in the day the Fed Chair Jerome Powell will be speaking followed by other FOMC members, Bullard and Evans.