What a wild and crazy couple of hours we had early this morning after the release of the FOMC statement and then Janet Yellen’s press conference. The markets emotions were clear in the fractious and erratic trade we saw in the Aussie dollar in the two hours between 4 and 6 am.
The Aussie has now been crushed to new lows for this run and the past 6 months or so and it sits at 0.8950 this morning.
I remain short and continue to hold the view the Aussie is heading into the 85-87 region in time.
Looking at the specifics of the FOMC and we see that there are a few things which it made clear. Firstly, that the Taper will end next month, secondly that rates are likely to increase next year and thirdly that the plans to exit QE are well advanced.
As noted above the USD was dominant on currency markets with the Euro down 0.7% to 1.2867 from a high of 1.2981 last night. That is a big selloff!. Sterling is down at 1.6280 and USDJPY sits at 108.29.
1.2740/50 is the next target and if it gets through there watch out.
Looking at stocks in the US and we see that they had an erratic day too with the market hitting new all-time highs before pulling back into the close. Like currency markets traders on the NYSE seem to recognise that while Janet Yellen remains a ‘Dove’, in no hurry to hike interest rates, the era of zero rates and QE is ending.
Two things Yellen highlighted which should help stocks even though the game is changing is that there is plenty of room in the labour market and inflation remains quiet. Indeed the CPI for August which was released last night showed no rise in prices which saw the year over year rate of price growth dip from 1.9% to 1.7%. So we end up witha situation where the US dollar is strong and stocks aren’t harmed too much by the FOMC rhetoric.
So, at the close the Dow was up 25 points to 17,157 for a gain of 0.15%, the Nasdaq rose 0.20% to 4,562 and the S&P pulled back from a high at 2,011 to close up 3 points to 2,002.
In Europe the release of EU CPI of 0.1% took the year on year rate to a paltry 0.4% showing how much work the ECB needs to do to avoid turning into Japan. this recognition seemed to help stocks with the DAX up 0.3% to 9,662, the CAC up 0.5% to 4,431% while stocks in the periphery of Milan and Madrid rose 1.56% and 1% respectively. In the UK the selling pre-referendum continued with the FTSE down 0.17%.
Locally the impact has been that the SPI 200 futures for September and December both rose 3 points to 5401 bid. The US rally is supportive of the local market but the the SPI 200 looks like it is sitting on a huge technical level in the 200 day moving average. But as Ric Spooner pointed out in yesterday’s stocks to watch the ASX broke a big level in the physical yesterday. So it will be an interesting days trade today.
Asian trade yesterday was interesting in itself with Shanghai down early but then rallying up 0.5% to 2,308. Hong Kong played catch up to the previous days US rally and its Typhoon induced closure by rising 0.99% to 24,376. In Tokyo stocks dipped a little falling 0.14% to 15,889.
On commodity markets Newcastle coal lost 15 cents for September delivery to $66.05 while September iron ore was largely unchanged at $84.10 a tonne. With the strength of the US dollar overnight gold fell to $1,222 an ounce, Nymex crude dipped to $93.98 a barrel and copper finished at $3.13 a pound.
On the data front it is a largely barren 24 hours with the exception of the Scottish referendum which has potentially huge implications if the referendum succeeds
Greg McKenna
NB: Please note all references to rates above are approximate
To learn more about Greg McKenna, read on here.
The Aussie has now been crushed to new lows for this run and the past 6 months or so and it sits at 0.8950 this morning.
I remain short and continue to hold the view the Aussie is heading into the 85-87 region in time.
Looking at the specifics of the FOMC and we see that there are a few things which it made clear. Firstly, that the Taper will end next month, secondly that rates are likely to increase next year and thirdly that the plans to exit QE are well advanced.
As noted above the USD was dominant on currency markets with the Euro down 0.7% to 1.2867 from a high of 1.2981 last night. That is a big selloff!. Sterling is down at 1.6280 and USDJPY sits at 108.29.
1.2740/50 is the next target and if it gets through there watch out.
Looking at stocks in the US and we see that they had an erratic day too with the market hitting new all-time highs before pulling back into the close. Like currency markets traders on the NYSE seem to recognise that while Janet Yellen remains a ‘Dove’, in no hurry to hike interest rates, the era of zero rates and QE is ending.
Two things Yellen highlighted which should help stocks even though the game is changing is that there is plenty of room in the labour market and inflation remains quiet. Indeed the CPI for August which was released last night showed no rise in prices which saw the year over year rate of price growth dip from 1.9% to 1.7%. So we end up witha situation where the US dollar is strong and stocks aren’t harmed too much by the FOMC rhetoric.
So, at the close the Dow was up 25 points to 17,157 for a gain of 0.15%, the Nasdaq rose 0.20% to 4,562 and the S&P pulled back from a high at 2,011 to close up 3 points to 2,002.
In Europe the release of EU CPI of 0.1% took the year on year rate to a paltry 0.4% showing how much work the ECB needs to do to avoid turning into Japan. this recognition seemed to help stocks with the DAX up 0.3% to 9,662, the CAC up 0.5% to 4,431% while stocks in the periphery of Milan and Madrid rose 1.56% and 1% respectively. In the UK the selling pre-referendum continued with the FTSE down 0.17%.
Locally the impact has been that the SPI 200 futures for September and December both rose 3 points to 5401 bid. The US rally is supportive of the local market but the the SPI 200 looks like it is sitting on a huge technical level in the 200 day moving average. But as Ric Spooner pointed out in yesterday’s stocks to watch the ASX broke a big level in the physical yesterday. So it will be an interesting days trade today.
Asian trade yesterday was interesting in itself with Shanghai down early but then rallying up 0.5% to 2,308. Hong Kong played catch up to the previous days US rally and its Typhoon induced closure by rising 0.99% to 24,376. In Tokyo stocks dipped a little falling 0.14% to 15,889.
On commodity markets Newcastle coal lost 15 cents for September delivery to $66.05 while September iron ore was largely unchanged at $84.10 a tonne. With the strength of the US dollar overnight gold fell to $1,222 an ounce, Nymex crude dipped to $93.98 a barrel and copper finished at $3.13 a pound.
On the data front it is a largely barren 24 hours with the exception of the Scottish referendum which has potentially huge implications if the referendum succeeds
Greg McKenna
NB: Please note all references to rates above are approximate
To learn more about Greg McKenna, read on here.
In addition to the website disclaimer below, the material on this page prepared by Vantage FX Pty Ltd does not contain a record of our prices or solicitation to trade. All opinions, news, research, tools, prices or other information is provided as general market commentary and marketing communication – not as investment advice. Consequently, any person acting on it does so entirely at their own risk. The expert writers express their personal opinions and will not assume any responsibility whatsoever for the forex trading account of the reader. We always aim for maximum accuracy and timeliness, and Vantage FX shall not be liable for any loss or damage, consequential or otherwise, which may arise from the use or reliance on this service and its content, inaccurate information or typos. No representation is being made that any results discussed within the report will be achieved, and past performance is not indicative of future performance.sary.
Recommended Content
Editors’ Picks
EUR/USD consolidates weekly gains above 1.1150
EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains
GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains.
Gold extends rally to new record-high above $2,610
Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap
SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.