We saw a bit of a relief rally in equities during the US session yesterday as ‘no news’ was treated as good news and the US indices had a positive day. The Nasdaq finished the session up 0.79% with the S&P and Dow just behind. The Euro bourses didn’t fair as well with the majority of headlines from the EU Economic Summit being on the pessimistic side of things. The Oil price continued to drive higher and we saw a miss on the US Final GDP quarterly print, coming out at 2% against the expected 2.2%.
In the FX world, several currencies are trading at vulnerable levels and the next couple of weeks could prove pivotal for longer term views as currency investors digest the impact of the potential trade war and the latest raft of tier 1 data. The commodity currencies have been under sustained pressure over the last few weeks and even though Cad caught a bit of a break with the Oil price last night, the Aud, Kiwi and Cad all look like they could accelerate to worse levels if the global trade tensions persist. Euro also looks vulnerable and is once again sitting near recent lows and a break below 1.1500 looks like it could open the way for a move to 1.1000 over the next few months.
Looking ahead to today and in the Asian session we’re expecting a further rate hike from the Bank of Indonesia as it attempts to push back against rapid IDR depreciation, this will be the third hike in the last couple of months and investors will be monitoring this closely to assess the effectiveness of the move. It’s relatively quiet on the data front once again but we do have the UK Current account data and the Canadian GDP numbers ahead in later sessions. However, once again the main catalysts for moves in the markets are likely to be any fresh news on the various Trade issues which are dominating market focus at present.