Positive Home Sales data, an increase in oil prices and a general rebellion by equities regarding the increased chance of a rate hike in June, saw equities rise across the board with the DJIA gaining 1.22%, the S&P 500 rallying 1.36%, just shy of making new YTD highs while the NASDAQ climbed 2.05%. The USD did not fair that well after initial bullishness was overturned as several key resistance points were struck across the board against other major currencies as markets digested the worse than expected Richmond Fed Manufacturing index figures . The EUR was weighed down by dovish comments from ECB`s Nowotny and worse than expected ZEW expectation figures from German and the EU at large. The GBP gained ground yesterday after the latest ICM polls showed that the vote is now split at 45%-45% for a stay-go, increasing the prospects of a BREXIT not occurring.
The Asian session saw equities track the firm gains in Wall Street with a more bullish sentiment seeing the Nikkei 225, which was also helped by a weakening JPY, gain 1.8%. The ASX 200 gaining 1.8% while Chinas Indexes relished the bullish sentiment and further injection by the BOC, leading to the Hang Seng gaining 2.6% and the Shanghai Composite gaining 0.3%.
In Fx, we saw an outflow of funds from safe haven currencies with the JPY weakening as the USDJPY breaching 110.00. Commodity linked currencies gained from the surge in crude prices with the CAD, AUD and NZD going bid against non-commodity linked currencies.
Crude enjoyed new YTD highs as markets reacted positively to a larger than expected drawdown in inventories (-5140K vs -1100K) which further pressured safe haven currencies and Gold, the later losing more than 2% on the day.
Today’s data brings the Bank of Canada to the spot light with the release of the Banks Rate Statement and the announcement regarding the current Overnight Rates. The rates are expected to remain unchanged and markets will scrutinise the Rate Statement for clues as to the future of monetary policy in Canada. Also, expected to cause a stir today, is the US Crude Oil Inventories release, which should it match the API release in terms of drawdown, will see the commodity reach for the 50/51 level which has been touted, further improving sentiment and weighing on safe haven currencies and gold while bolstering equities and commodity linked currencies.
Other data being released today is a s follows:
- German Ifo Business Climate expected at 106.9
- ECOFIN Meetings
- BOC Rate Statement
- Overnight Rate expected at 0.5%
- Crude Oil Inventories expected at -1.7M
- Private Capital Expenditure q/q expected at -3.2%
- Annual Budget Release