Currencies stay calm as stocks hit records

Currencies stay calm as stocks hit records

Share markets globally are at or near post GFC highs, and in many cases record highs, as expectations of an imminent US/China trade deal fuels optimism about global growth. Stronger than forecast US data added to the party atmosphere.

Foreign exchange markets echo the sentiment, although in much more measured ways. Gold and bonds slipped as investors favoured risk assets, and aluminium and copper rose as traders priced an improving demand outlook.

US GDP grew at an annual rate of 2.1% in the third quarter, outstripping forecasts of a 1.9% expansion. Preliminary data on October durable and capital goods orders also smashed expectations. Importantly, inflation as expressed by the PCE deflator remains subdued. Better growth and no inflation pressure on the Federal Reserve provided Goldilocks trading conditions

The US dollar lifted again, particularly against the safer haven Japanese Yen. A build in US weekly crude oil inventories weighed on energy prices, although industrial metals generally gained. Despite pro-growth moves in shares and commodities the Australian, New Zealand and Canadian dollars failed to find support. Cryptocurrencies bounced modestly after four weeks of sustained pressure.

Asia Pacific share index futures point to opening gains today. Australian shares outperformed yesterday as analysts firmed up forecasts for further rate cuts after a speech on Tuesday from RBA Governor Philip Lowe. Yesterday’s close was juts 26 index points from the all-time high, and there are raised expectations of a new high water mark in trading today.