A neutral to cautious session looks likely for the stock market this morning as investors wait on the upcoming profit-reporting season. Yesterday’s lack lustre trading provides no reason to assume that confidence and the next leg in the bull market will re- emerge today.
Rio Tinto unveiled a solid production report this morning, meeting 2017 guidance for all its major products. The question is whether this in line performance will be enough to maintain upward momentum in the stock this morning on the back of the 19% rally since 12 December.
The ongoing decline in the US Dollar was the key theme in international markets last night. Market expectations of co-ordinated global growth appear to be the key driver of the realignment in forex valuations. Traders are foreseeing an environment where improving economies will allow central banks to move in the direction of normalising monetary policy without damaging either growth or inflation expectations. If this scenario plays out, the ECB; Bank of Japan and BOE may all move sooner and faster on monetary policy than previously assumed.
However, the Aussie Dollar is now in the zone of the key 78.6% Fibonacci retracement level of the move down from .8125 to .7501. If the Aussie begins to turn around this level it may signal that markets have taken the co-ordinated global growth theme far enough.