Global markets experienced another relatively calm day yesterday ahead of the latest FOMC meeting minutes and investors hoping for some volatility from them were disappointed when they came out largely in line with market thinking. They indicated that there could be an end to the balance sheet runoff this and that more data will be needed for further moves in interest rates with Vice Chair Richard Clarida advising there are scenarios for either a hike or a cut. US stock markets rallied marginally after the release and the dollar also came back slightly better bid but there were no excessive moves in the aftermath. The Chinese Yuan appreciated further on the back of reported US currency stability demands as part of the ongoing trade negotiations, the CNY now not far off recent highs against the greenback at 6.7200. The pound experienced another whippy day as a topside move on positive Brexit news was reversed later in the day by reports of a potential ratings downgrade by Fitch for the UK, strangely enough on Brexit concerns. Oil continued to drive higher with WTI now north of $57/b and Brent over $67/b and gold dropped off new yearly highs towards the end of the session.
The markets main focus remains the ongoing trade discussions between the US and China and these will likely provide the next catalyst for a strong move in sentiment. Hopes that the US will extent the March 1 tariff deadline are growing and any confirmation of this should provide a relief rally across stocks and risk trades with implementation probably leading to a strong sell off. Investors will continue to monitor news channels for the next update on the situation and react accordingly.
With the Fed minutes out of the way and largely in line with market expectation, investors will turn their attention to the Europe and the ECB minutes later tonight, date has been poor out of the EU in the last few months and once again the market will be anticipating a more dovish leaning to the minutes. This will place currency risk to the topside and with a series of PMI data out earlier in the session we could see some strong moves in the single currency during the London time zone.
Once again the initial focus for the Asian session will be the Australian market with the latest release of employment figures due out today. Market expectation is for an increase of 15k jobs with the unemployment rate remaining stable at 5%, recent data surprises have been to the downside and that will probably be the leaning into today’s figures as well with the market positioned accordingly. Into the London session and as mentioned above the focus will be squarely on the European market as well as the ongoing Brexit situation. The US day will have a strong focus on the trade talks however the latest Durable Goods data is due out and traders will be paying close attention to the result.