Reaction to the more hawkish than expected Fed outlook continued to impact trading Thursday, particularly in currency markets. Gold plunged in reaction to a rising US dollar, losing over 1% and falling back under the $1,300 level. Other defensive plays like JPY and CHF also spent the day in retreat.
Stock markets also retreated moderately with traders recognizing that the era of easy money is coming to an end. The NASDAQ, which had outperformed in the later stages of the rally, has been leading the way back downward, particularly Apple, which continues to struggle heading into key product launches.
In energy trading, Crude oil fluctuated around $50.00 while gasoline continued to drift downward. Natural gas plunged 4.4% on a bigger than expected storage build heading toward heating season. Weakness in commodity markets has been dragging on resource stocks and currencies in Canada and Australia.
The New Zealand Dollar could be particularly active today in the last day of trading before the General Election. In recent weeks, traders have reacted positively to polls and news favouring the incumbent National Party and negatively to polls and news favouring Labour. The two parties have been trading the lead back and forth in recent weeks. Lately, National has been in the lead, but it’s unclear if it will be able to win a Majority government or have to seek out coalition partners. A lot may depend on whether the Green party gets enough votes to qualify as a party in Parliament.
Sterling picked up Thursday and could be particularly active Friday around UK PM May’s speech on Brexit. Negotiations haven’t been progressing as fast as some would like and it’s expected that she may be set to discuss new strategies heading toward the next round of negotiations. Traders should note that of late, signs of strength on the UK side (and complaining form the EU) have boosted the pound, while signs of weakness or capitulation could undermine GBP.
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