Alpesh Patel
InvestingBetter.com
General market theme
Yet another 24 hours of increased volatility in the money markets as the market bias remains unclear and investors are bracing for a bumpy ride ahead. We’ve made word about the changing conditions that market participants have been facing since the start of the year that have resulted in some serious portfolio repositioning. The release of various economic reports yesterday did little to make currencies’ outlook clearer and it seems that we will be facing similar market conditions for some more time.
Price action highlights
The Euro was again one of the highlights of the majors’ universe as the European currency rallied towards the 1.0950 area during the US session but overnight the move was reversed and already the Euro is below the 1.0900 level. The reason behind this development is the Bank of Japan’s decision to adopt negative interest rates, a move that is taking its toll across all the majors instruments as we can see this morning and adds to the complexity of the global economics at the beginning of 2016.
The Cable has been affected less by the BoJ decision as we see no serious reaction from the currency pair, however the Pound was on the rise again yesterday reaching the 1.4400 level. It is completely weird to see the Cable rallying higher during a day when the reports that were released confirmed the negative bias of the currency but it seems that investors were prepared for even worse figures. Nevertheless we will keep insisting that the UK currency is trading above its strength and we should be prepared for a move lower.
Focus of the day
Today our attention will be focused on the release of the inflation levels from the Eurozone early this morning that might slow down the sell-off on the back of the BoJ decision. The inflation levels are expected to print higher on a yearly basis but still they are far away from ECB’s targets. Later in the day the release of the US Gross Domestic Product and Personal Consumption levels is expected by analysts to print lower adding to the worries about the domestic US economy and the Dollar’s outlook looking ahead.
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