Stock markets look set to once again start the week in negative territory as the same old worries on global growth concerns hit investor sentiment and translate through to market moves. Global stock indices showed a ‘sea of red’ by Friday’s close and Asian markets are set to follow in the same vein this morning. ‘Risk on’ trades suffered across the board with haven currencies gaining ground against their peers, the dollar continued to grind higher, with the Dxy trading up near 97.00 again and Yen gained ground well on the crosses. Oil continued to decline with WTI trading under $61/b although news of production cuts from OPEC may help the price to stabilise over the coming sessions. The pound took a hit in early Asian trading on the back of further Brexit concerns in the UK over the weekend, this situation it likely to remain tense and expect further moves across sterling as PM May attempts to get the latest proposed version of her deal through parliament.
We’ve got another interesting trading week ahead, now that the US midterms and the latest Fed meeting are behind us, with on expectation outcomes from both, the market will turn it’s attention to the underlying fundamentals as well as the ongoing global geo-political issues. It’s likely to be a relatively slow start to the week with the US and Canada on holiday today, but expect moves and volatility to pick up as we progress. We’ve got CPI data out of both the UK and the US later in the week and we’re set to hear from Fed Chair Jerome Powell. Closer to home, Australian traders will be focussing on the key fundamentals of the Wage Price Index and Employment data for short term direction in the currency, although both are not expected to have much of an effect on current RBA thinking.
Today’s sessions could be a bit more sedate than those we experienced last week as traders use the excuse of a US holiday to reassess the market conditions. There are a few currencies that are close to vulnerable levels which could lead to some extended moves and increase volatility across the markets, especially if liquidity is thinner later in the day. The Euro is sitting just above the recent lows around 1.1300 and UsdCny is once again on the move back near recent highs, significant moves on either could translate over to other majors and EM’s and see a significant move in the Dxy.