Financial markets experienced a mixed day yesterday with no real stand out moves across the global stock indices. Earnings season continued and results have become more mixed as the week has progressed. Last night in the US we saw better numbers from both Microsoft and Facebook which helped the Nasdaq move higher but poor numbers and forecasts from 3M and UPS weighed on the S&P 500. The dollar continued to grind higher with the Dxy breaking through 98.00 and hitting levels not seen since for nearly two years. In the commodities space, Oil drifted back off of recent highs although still remains bid and Gold managed to bounce back off of lows sub 1270 earlier in the week to trade back up towards 1280 this morning.
Currencies have been trading at five year lows in volatility terms over the last few weeks, however as mentioned above the greenback is now making fresh ground. Market dynamics are naturally changing all the time and despite a considerably more dovish Fed the dollar remains attractive as other major central banks have followed swiftly on the Fed’s heels. The dollar will remain bid in this environment while data continues to look more favourable from the US, especially with regard to the EU and tonight’s US GDP print could be crucial from a technical point of view. If we see a good number then this should push the dollar into greater highs against the basket and will probably see the Euro targeting the key psychological level of 1.1000.
The kiwi market has been a focus already this morning in Asia with the currency gaining nearly 1% from yesterday’s lows as first we heard from RBNZ Governor Orr that they are not particularly concerned with recent weaker GDP data and then had a better than expected Trade Balance print. In the current environment any rallies for the kiwi should be capped against the dollar however those two contributing factors will make the flightless bird more attractive on the crosses and we should see continued increases in the next few sessions.
Looking at the rest of today’s trading sessions and there’s little in the way of economic data releases due in both the Asian and London sessions. The SNB Governor Thomas Jordan is speaking in Bern close to the European open and Swiss traders will be paying close attention to what he has got to say especially given recent moves in the currency. The main focus of the day will be that US GDP number which is due for release early in the New York session, expectation is for the quarterly data to print 2.3% and expect anything over 0.2% away from that to see some decent moves in the market.