It was a bit of a mixed day for financial markets yesterday with further positive news on some trade concerns coming at the same time as other trade policies impact the markets. Currency moves were once again heavily influenced by sentiment, further positive news on a Brexit deal hit the markets with talk now of a special summit as early as November to sign the deal, this helped to support the pound through a whippy trading day. There was also progress on the Nafta front with President Trump confident that a deal can be arranged, this helped the Loonie drive higher during the North American session and dialogue is expected to push forward from here.
Oil shot higher through yesterday’s trading as Hurricane Florence looks set to disrupt the US gasoline markets and the impact of US sanctions on Iran hits their exports. US stock markets and yields pushed higher as data continued to surprise to the topside, this time small business confidence and job openings pushed helped the gains with the 10 year treasury yields once again within touching distance of 3%.
The perfect storm appears to be building for emerging markets currencies with some pairs sitting at very vulnerable levels having already broken to historic lows. We’re seeing a strong US economy push Fed rate hike expectations higher at the same time as it’s international policy puts pressure on global trade, once you throw a rising Oil price into the equation when many of these economies are importers, then the stage is set for some potentially nasty moves. Investors will continue to monitor the situation carefully over the coming weeks with contagion fears still prevalent.
Looking ahead to today’s trading and Asian markets will open with a cautiously optimistic tone with the usual follow on from an upbeat US session expected to be tampered by the underlying global trade concerns and fragile emerging markets. Sentiment is once again set to dominate flows and with little in the way of fundamental economic data releases due until US PPI and Crude Oil Inventories later in the day, investors will be monitoring the news wires closely as we move through the trading day.
