or what on the surface looked like one of the quieter news days of the week, there ended up being a lot of fireworks through the European and North American trading sessions, particularly in currency and commodity markets.
Market action centred around a significant technical breakdown for the USD Index, which took out a trend support line and a prior low, triggering stops and generating a run for the exits.
A number of markets that trade contrary to the US Dollar capitalized on the collapse. EUR in particular staged a big rally, clearing two Fibonacci levels. EUR was boosted by higher than expected European inflation readings which indicated deflation pressures have started to fade as a number of central banks predicted. Signs that Greece and its creditors could be inching toward a deal with Greece submitting a new offer, the creditor group working on a combined offer, and more senior politicians getting involved indicating both sides appear to be getting more serious about getting business done.
EUR may remain active with more data due ahead of an ECB meeting and press conference with President Draghi. No changes are expected to interest rates or the QE program but with inflation bouncing back, the central bank may be under less pressure to explain why QE purchases to date have been running smaller than the amount needed to hit the bank’s targets.
The USD drop also lit a fire under commodity markets again today. For a second straight day, wheat soared, gaining over 3% in concerns too much rain in parts of the US could impact crop quality. Oats also posted a 3% gain. Crude oil climbed with WTI clearing $60.00 but stopping short of its previous high.
CAD and NOK rebounded along with oil prices, but the top performers among resource currencies were AUD and NZD. AUD continued to soar, pulling NZD along for the ride, in the wake of yesterday’s decision to hold interest rates steady, stay neutral on future moves and back off a bit on its bearish dollar talk. Both dollars could be active again today with Australia GDP and New Zealand commodity price reports due.
USD, meanwhile, has the potential to remain active through the next 24 hours as the guessing game of when the Fed may start raising interest rates picks up again Wednesday with ADP payrolls and the Fed’s Beige Book regional economic report on the day. Positive surprises could move timetable speculation forward and boost USD while weak reports could push timetable speculation outward and undermine USD.
In addition, service PMI reports from around the world, trade figures for North America and the OECD’s latest round of economic forecasts could keep the pot boiling and trading active world equity, currency and commodity markets.
There have been no major corporate announcements after the US close today.
Significant announcements released overnight include:
Singapore PMI 50.2 vs street 49.3
Singapore electronics 49.8 vs street 49.5
US factory orders (0.4%) vs street (0.1%)
Spain unemployment change (118K) vs street (116K)
Germany unemployment chnge (6K) vs street (10K)
Germany unemployment rate 6.4% as expected
Greece manufacturing PMI 48.0 vs previous 46.5
UK construction PMI 55.9 vs street 55.0
Eurozone consumer prices 0.3% vs street 0.2%
Eurozone core CPI 0.9% vs street 0.7%
Eurozone producer prices (2.2%) vs street (2.0%)
Upcoming significant announcements include:
11:00 am AEST NZ ANZ commodity prices previous (7.4%)
11:30 am AESGT Australia GDP street 2.1% vs previous 2.5%
12:00 am BST UK BRC shop prices street (1.8%)
7:00 am BST UK Nationwide house prices street 4.9%
9:00 am BST Italy unemployment rate street 12.9%
10:00 am BST Eurozone unemployment rate street 11.2%
10:00 am BST Eurozone retail sales street 2.0%
12:45 pm BST ECB decision no change to QE or interest rate expected
1:30 pm BST ECB President Draghi press conference
10:00 am BST OECD economic outlook
8:15 am EDT US ADP Payrolls street 200K vs previous 169K
8:30 am EDT US trade balance street ($44.0B)
8:30 am EDT Canada trade balance street ($2.1B)
10:30 am EDT US crude oil inventories street (2.2 mmbbls)
2:00 pm EDT US Beige Book
Service/non-manufacturing PMI reports:
9:30 am AEST Australia previous 49.7
11:35 am AEST Japan previous 51.3
11:45 am AEST China HSBC previous 52.9
3:00 pm AEST India previous 52.4
7:30 am BST Sweden street 56.0
8:15 am BST Spain street 59.4
8:45 am BST Italy street 52.8
8:50 am BST France street 51.6
8:55 am BST Germany street 52.9
9:00 am BST Eurozone street 53.3
9:30 am BST UK street 59.2
9:00 am EDT Brazil previous 44.6
9:45 am EDT US Markit street 56.4
10:00 am EDT US ISM street 57.0 vs previous 57.8
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