Gold and Oil rally heading into US Debate and ECB meeting
It’s been a big day for trading across multiple markets and it looks like the fireworks may be just getting started.
US indices started the day off strong but faded into the close with traders anticipating the potential for volatility from the upcoming final US Presidential Debate. To date, markets have been pricing in a Clinton victory but having seen how investors were caught totally offside by the Brexit vote, some traders appear to be getting wary about getting too complacent. Defensive havens like Gold and JPY picked up today indicating that some traders are starting to take profits of the table against earnings news and move some capital to the sidelines heading toward the big day.
Intel for example, fell on the day as traders focused more on disappointing guidance than strong earnings. Aftermarket results have been mixed with a big beat by Citrix offset by misses at Mattel and eBay.
Crude oil also staged a big rally Wednesday on the back of another strong weekly inventory report that showed a 5 million barrel decrease last week, a huge improvement on the 2 million barrel increase the street had expected showing the US supply/demand balance continuing to tighten. This news lifted energy stocks and CAD for a time, helping to keep indices in the green.
CAD had a very mixed day starting out strong then turning south and underperforming other resource currencies. The Bank of Canada held interest rates steady and issued a mixed statement. While the central bank cut its GDP guidance and pushed the timetable for a full recovery out to mid-2018, it also suggested that the oil sector (one of the biggest headwinds to the economy) may have bottomed. Some traders may be speculating in a Canadian rate cut but considering that the bank also indicated some of the softer outlook is due to governments’ efforts to cool the overheated Toronto and Vancouver housing markets, a rate cut appears unlikely as it would make the house price problem worse, just as we’ve seen in New Zealand this year. The statement and accompanying reports and commentary appear designed to keep the free floating CAD on its heels with actual stimulus held in reserve in case its really needed in the future.
The Mexican Peso (MXN) also has been active today and is likely to remain in the spotlight through today’s trading session. MXN was boosted by the oil rally, but it could be particularly active around the debate. With Donald Trump so antagonistic toward Mexico, the rise and fall of the Peso has mirrored the rise and fall of Trump’s momentum. The peso bottomed just before the first debate and could be in the spotlight today.
AUD and NZD have been picking up today along with commodity prices and the Australian Dollar may also attract attention from traders today around the Australian employment report. Last month Australia shed jobs and a rebound is expected. Earlier this month, US employment was neutral while Canada and the UK have posted positive surprises.
Sterling has been picking up this week on positive UK economic data with retail sales due Thursday morning. The main event in Europe tomorrow is and ECB decision and Draghi press conference. While no changes are expected, EUR has been retreating into the meeting against USD, GBP and JPY. This suggests that traders expect the ECB to crush talk of tapering QE purchases and perhaps to hint toward an extension of the program which is currently scheduled to end in March.
Citrix Systems $1.32 vs street $1.19, raises 2016 guidance to $5.18-$5.20 from $5.00-$5.10
eBay $0.45 vs street $0.44
Mattel $0.70 vs street $0.71
Tesla Motors new product announcement scheduled for 2:00 pm PDT
Significant announcements released overnight include:
Canada interest rate 0.50% no change as expected
US DOE crude oil inventories (5.2 mmbbls) vs street 2.1 mmbbls and previous 4.8 mmbbls
US DOE gasoline inventories 2.4 mmbbls vs street (1.1 mmbbls)
US housing starts 1,047K vs street 1,175K
US building permits 1,225 K vs street 1,165K
UK jobless claims 0.7K vs street 3.2K
UK 3M employment change 106K vs street 76K and previous 174K
UK unemployment rate 4.9% as expected
UK avg weekly earnings 2.3% as expected
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
7:45 pm EDT FOMC Dudley speaking
9:00 pm EDT US Final Presidential Debate: Trump vs Clinton Round 3
11:30 am AEDT Australia employment change street 15K vs previous (4K)
11:30 am AEDT Australia full-time jobs previous 11K
11:30 am AEDT Australia part-time jobs previous (15K)
11:30 am AEDT Australia unemployment rate street 5.7%
7:00 am BST Germany producer prices street (1.2%)
8:30 am BST Sweden unemployment rate street 6.3%
9:30 am BST UK retail sales street 4.7% vs previous 6.2%
9:30 am BST UK retail ex auto street 4.4% vs previous 5.9%
12:45 pm BST ECB decision no changes to interest rate or QU expected
1:30 pm BST ECB Draghi press conference
8:30 am EDT US jobless claims street 250K
8:30 am EDT US Philadelphia Fed street 5.0 vs previous 12.8
10:00 am EDT US existing home sales street 5.35M
10:00 am EDT US leading index street 0.2%
10:30 am EDT US natural gas street 73 BCF
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