FOMC and DOE crush USD and crude oil; Australia jobs preview

CMC Markets

The bulk of today’s trading action has been in commodities and currencies driven by two main events. 

Minutes from the last Fed meeting indicated that some members were ready to announce a date for starting to normalize the balance sheet but members settled on “relatively soon”. Many on the street still think this could come as soon as September but I don’t think it will be until after the dust settles from the looming battles over the debt limit and budget with a potential government shutdown looming. 

The Fed minutes also indicated disagreement over what to do about interest rates considering recent softness in inflation. The street took this aspect as dovish sending USD downward. The retreat in the greenback lifted the lid off of other currencies, igniting rallies in gold and JPY, plus resource currencies like CAD, AUD and NZD. Gains by gold and copper today sparked rallies in both base and precious metal miners which could carry through to today’s Australian trading. 

It was a split day for resource markets as crude oil and energy stocks sold off. Although crude oil inventories posted another big decline, traders soured on WTI after seeing that US production increased. Friday’s Baker Hughes drill rig count is the next data point traders may key in on related to US production trends. 

In addition to ongoing action in resource sectors, Australian markets could be active around today’s employment report. The street is expecting a 20K increase this month, which does not seem aggressive as Canada added 12K on a big surge in full time employment. The full-time / part-time split was heavily in favour of full time last month, so a reversal there would not be unusual. 
Thursday morning brings a number of mid-tier economic announcements out of the US plus earnings from Wal-Mart which could keep the spotlight on retailers. Competitor Target gained 3.4% today after beating the street on earnings and raising guidance. fell slightly after President Trump complained about the company’s impact on traditional retailing jobs. 

The Euro may attract some attention from traders Thursday as well. Today the single currency slipped back on reports that President Draghi would rather talk tapering in the fall rather than at the upcoming Jackson Hole Fed conference. ECB minutes are out Thursday along with Eurozone economic data. 

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