Financial markets had a relatively steady day as investors continued to digest the latest updates with regard to the global trade situation. Sentiment improved slightly as news the President Trump may delay auto tariffs for six months hit the market helping to allay fears that the US would be involved in trade wars on multiple fronts. Stock markets had another positive day across the globe although Asian indices are pricing in a mixed start as tensions between the US and China continue to weigh. The dollar edged higher as risk positioning across the currencies continued to play out in the current environment, the Yuan remains at decreased levels as does it’s major proxy the Aussie and even though we have seen some pull back in the haven pairs, they still remain at elevated levels. Treasuries continue to grind higher with the barometer 10 year yield now trading back down near yearly lows at 2.37%. The Oil price firmed as uncertainty in the middle east superseded the impact of better then expected US stockpiles, WTI now at $62.25/b and Brent just under $72/b.
US Retail Sales data was much worse than expected last night for both the headline and the core prints, however US stock markets shrugged them off to finish stronger on the day. Despite the lack of short term reaction in both equities and the currency, investors will continue to monitor the tier 1 US data very closely as will the Federal Reserve and if we start to see more data turning south expect more dovish expectations to creep into market pricing. Stock bulls will be hoping this comes sooner rather than later after recent pull backs, however the trade for currency bears may be more complicated as haven flows still support the greenback. In the current environment sentiment will continue to dominate flow, especially while tensions between the US and China remain high, however the influence of the underlying data will exert itself over the longer term and traders will be quick to react if both indicate a tough time ahead for markets.
The Aussie dollar will once again come under close scrutiny this morning in Asia as employment data is due out. The Aussie is sitting on recent lows and the importance of these numbers has been ratcheted up in recent weeks by the RBA. Expectation is for an increase of 15k jobs and the unemployment rate to remain at 5%, however anything under expectations will push rate cut expectations further along the curve and drive the currency lower to challenge the flash crash lows of early January.
It’s relatively quiet over the rest of the Asian session today although RBA Assistant governor Michele Bullock is speaking later in the day. It’s quiet in the European session with regard to data releases however we do hear from Buba President Jens Weidmann during the day. It’s all second tier data in the New York session with the Philly Fed Manufacturing Index due out as well as Manufacturing sales data in Canada, so once again expect the news wires and sentiment to drive market flow.