We saw a good recovery in the equity markets yesterday after they’d experienced several tough sessions on the back of proposed tariffs from the US. The Dow finished the day up 1.37% with the S&P not far behind at 1.1%, the European markets also had a strong day across the board and this return to risk transferred well across to the FX markets with major safe haven currencies the Jpy and Chf seeing good selling throughout the day.
Earlier in the day the Euro had been under pressure as the Italian elections resulted in a hung parliament and we now anticipate a significant period of political bartering to establish the new government which could result in further volatility for the single currency. The Dxy remained trading around the 90.00 as those risk on trades came back into the market later in the sessions.
Looking ahead to today’s trading and the markets focus will be firmly on Australia for the Asian session, we have Retail Sales data due out this morning with market expectation at +0.4% mom, however, any reaction from this will be short lived in the Aussie as we have the RBA cash rate due out at 2.30 pm. Once again expectation is firmly in the ‘no change’ camp for the Bank will leave rates at 1.50%, but all eyes will be on the statement to see if there is any change in sentiment. We expect little change from previous statements with recent data not giving the committee enough ammo to change its current forward guidance.
It’s very quiet in terms of fundamental economic data in the London session and thing’s get only a little more interesting into New York where we have the Canadian Ivey PMI and GDT Price Index numbers due for release. Traders will continue to closely monitor the news wires for any fresh catalysts with the current themes of US tariffs, Brexit and this week’s central bank releases still very much in everyone’s focus.