Trading ranges on international markets have narrowed over the past couple of sessions. The signs are that this subdued volatility and relative inactivity will continue on the Australian market today and in the lead up to tomorrow’s Bank of Japan meeting.
Markets appear to have arrived at a level that reflects the consensus view of the balance between risk and reward leading into this week’s central bank meetings. Markets have gone some way towards adjusting for a Fed tightening. Bond yields and the $US have risen while stock indices are lower. As often happens leading into major events, a number of markets are poised at critical chart levels. The US long bond and the US Dollar Index, for example have both settled at their 200 day moving average.
However current levels represent a compromise position with movement in either direction likely if central banks are deemed to be either more hawkish or more dovish than currently expected