Stock markets had another volatile day across the globe yesterday but US indices managed to finish the day nicely in the black. Asian markets had led the way topside earlier in the day after comments from President Trump that there would be a ‘great deal with China’. Euro stock markets didn’t follow the lead from Asia and had a fairly tepid day, but the US eventually jumped on board the move as Treasuries dropped off and the dollar drove higher, with the dollar index topping 97.00 for the first time since June 2017.
The Euro and Cable came under further pressure as economic data failed to impress and Cad caught a bid tone towards the end of the day as BOC Governor Poloz maintained his recent positive tone on the economy although did advise that rate hikes will not be a ‘rapid process’. The Yen was sold against the dollar and on most of the crosses through the day as haven flows reversed. The Aussie and Kiwi also managed to hold ground against the greenback buy certainly the Aussie could be tested later this morning on the CPI data announcement.
Yesterday’s moves in Asian were probably a good indication of how sensitive the market is to fresh news influencing investor sentiment as the market gained good ground on the back of what was really misinterpreted comments. The President had advised that a great deal was possible, but also confirmed that he was ready to go with more tariffs if a deal wasn’t possible. He further added that ‘it had to be great as they have drained our country’, not necessarily the kind of tone that is likely to be well received by the Chinese side of the equation.
As this week progresses, fundamentals could start to take a more dominant part of trading decisions as we see more tier 1 data releases and hear from two major central banks on their latest rates decisions, or more crucially on their latest market views and potential moves forward.
First up today in Australia we have the latest CPI data due with market expectation of an increase of 0.1% from last quarter’s 0.4% print and a 0.2% drop on the year on year data. Aussie traders have been targeting this number for a while now and expect to see some decent moves in the currency if we see a result away from expectation. Later in the Asian session and we have the latest BOJ rate announcement, outlook report and press conference, traders are set to be most focussed on the banks plans for bond purchasing moving forward as once again there’s no real chance of any move in the rate. The London session is relatively quiet again in terms of data releases but as we move into the North American session, investors will be monitoring the latest ADP Non-Farm number and then the Canadian GDP release.