Wednesday saw another reversal in many markets as the USD paused for a rest enabling some of the markets it crushed on Tuesday to rebound a bit. In particular, crude oil came charging right back, retaking much of its lost territory while gold staged a more moderate rebound. Currencies were also active today, particularly resource Dollars. AUD continued to benefit from yesterday’s indication by RBA Governor Stevens that he was leaning away from any more easing. Meanwhile, the Bank of Canada held interest rates and erased any dovish leanings in taking a fully neutral stance. The BoC also indicated that exports are starting to improve, which suggests Canada is starting to benefit from US growth and housing remains strong. RUB also rallied on the day benefitting from conflicting reports that a truce may have been agreed to fro Ukraine, this also gave European indices a lift on the day. The effect on US indices was fleeting, however, sending indices to new highs in the morning but not enough to keep them going. The Dow finished up on the day but well off its high, while the NASDAQ closed down to complete a bearish key reversal day. Apple falling back under $100 after Samsung upped the competitive challenge with two new smartphones of its own didn’t help matters either. It’s been a busy start to the week but with the preliminaries wrapping up today, focus now turns to the main events. Central banks and monetary policy appear likely to dominate trading for the rest of the week. There are four central bank de3cisions scheduled between now and when US markets reopen. The Bank of Japan and the ECB may attract the most attention. In both cases, speculation has grown that more stimulus could be on the way particularly after cabinet shuffles in France and Japan reflected demand for more fiscal reforms. JPY and EUR have been depressed lately on stimulus speculation but could bounce quickly if none emerges. The ECB appears particularly unlikely to announce anything new since it is already launching targeted LTRO loans to banks this month. The Bank of England and Sweden’s Riskbank appear unlikely to do anything or rock the boat in any way particularly in the UK with the Scottish Independence vote coming in two weeks. Although the US Fed meeting isn’t until later in the month, speculation on how soon the central bank may start to take away stimulus may also be a big driver of trading over the next two days. In addition to Thursday’s ADP and Friday’s nonfarm payroll reports and US service PMI, a number of FOMC members are scheduled to speak this week before the usual pre-meeting blackout kicks in. Any surprises here could have a big impact on trading in indices, USD and USD sensitive markets like major currency pairs and commodities. Even though the Bank of Canada has met, the week isn’t over for CAD either as Thursday brings trade numbers and Friday brings a new employment report which may give a better idea of where jobs are heading over last month’s fiasco. Economic News Significant announcements released overnight include: Canada interest rate 1.00% no change as expected US factory orders 10.5% vs street 11.0% UK service PMI 60.5 vs street 58.5 Germany service PMI 54.9 vs previous 56.4 Sweden service PMI 54.2 vs previous 60.1 Spain service PMI 58.1 vs previous 56.2 Italy service PMI 49.8 vs previous 52.8 France service PMI 50.3 vs previous 51.1 Eurozone retail sales 0.8% vs street 0.9% Upcoming significant announcements include: 10:00 am AEST NZ house prices previous 7.6% 11:30 am AEST Australia trade balance street $1.75B 11:30 am AEST Australia retail sales street 0.4% 2:00 pm AESTish Japan interest rate and QE no changes expected 4:30 pm AEST Bank of Japan Governor Kuroda speaking 6:30 am BST France Q2 unemployment rate street 10.2% 6:30 am BST France Q2 unemployment chng previous 23K 7:00 am BST Germany factory orders street 1.1% 9:00 am BST Norway economic forecasts 8:30 am BST Sweden interest rate 0.25% no change expected 12:00 pm BST UK interest rate and QE 0.50% and £375B no change expected 12:45 pm BST ECB interest rate and QE no changes expected 1:30 pm BST ECB President Draghi press conference 8:30 am EDT US ADP payrolls street 220K vs previous 218K 8:30 am EDT US trade balance street ($42.4B) 8:30 am EDT Canada trade balance street $1.1B 9:45 am EDT US Markit service PMI street 58.5 10:00 am EDT US ISM non-manu PMI street 57.6 10:30 am EDT US natural gas street 74 BCF 11:00 am EDT US crude oil inventories street (1.0 mmbbls) FOMC members Mester, Powell, Fisher and Kocherlakota speaking later in the day.
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