Global stock markets continued to drive higher during yesterdays trading on growing optimism that a trade deal between the US and China could be possible in the near future, encouraging comments from both sides spurring the rally. Asian markets had a strong day and European bourses continued in the same vein despite the beginning of a process in the US that could bring about fresh tariffs on Euro car imports. US markets were on holiday and this was reflected in the later session with the dollar and US futures trading in relatively tight ranges. The pound gained some ground on news of dissent in the Labour party which instilled some much needed Brexit optimism, Cable gaining a big figure on the day to trade back above 1.2900 and EurGbp dropping back to the 0.8750 level. Commodities continued to grind higher with Oil now sitting at three month highs and Gold surging to fresh yearly highs.
After a quiet start to the week, investors are expecting volatility to pick up over the next few days with a raft of tier 1 data due out and some significant central bank events and speakers. The ongoing trade negotiations will continue to be a major focus for investors as well as a host of other geo-political issues that are still unresolved.
The RBA will be releasing its Monetary Policy Meeting Minutes today and traders will be analysing them closely, although market impact is expected to be light given the clear policy change we’ve seen from the bank over the last couple of weeks. Key issues remain the overall global trade situation on the international front and housing and wage growth concerns on the domestic side of things. The potential for greater impact on the Australian markets may come from the increasing political tension between Canberra and Beijing. News of possible Chinese hacking of Australian politicians networks in the lead up to the election and increased clearing times for Australian goods at Chinese ports could all weigh on the Aussie dollar and counteract any move from optimism on the overall global trade situation.
Looking ahead to the rest of the days trading and the data calendar is quiet through the rest of the Asian session. The focus will once again turn to UK markets on the London open with the release of the latest earnings and employment data. This is followed by the German ZEW economic sentiment indicator with market expectation of a -14.1 print. The US markets will return to action later today and although there is no significant date due out, volatility is expected to pick up on the back of further news on the various trade issues that are currently in focus.