US stock indexes closed in the red yesterday as markets prepare for today’s key events. The DJIA lost 0.54%, the S&P 500 lost 0.6% while the Nasdaq 100 closed at -0.51%. The major focus in the US session was on the IPO of Snap which opened at $17 but soon found itself in the mid 20`s, undoubtable putting a big smile on the face of those who took advantage of the move. Asian equity markets followed Wall Street`s lead, closing in the red with the Nikkei 225 losing 0.5% and the ASX 200.
In FX, the USD softened a bit over night but the USD Index, a measure of the strength of the USD against a basket of currencies, was still relatively bid as we saw the Index close in the green for the 5th straight day as bulls managed to hold the 102 level. Commodity linked currencies were the hardest hit as we saw the AUD and NZD lose significant ground against the green back as the strengthening USD brings down the price of commodities.
In commodities, crude oil traded flat overnight, failing to recover from the days sell off which came on the back of doubts concerning supply freezes, with OPEC members missing their target cuts and non -OPEC producers mostly defying the freeze. Gold continues to slump as we see sellers looking to regain some of their recent losses with a firm eye on 1200.
The strength in the USD and by large the weakness in commodities and now equites comes of the back of positive US data and speeches by FOMC members, which have prompted traders to price in a 90% probability of a rate hike in March. Several members have hit the wires saying that March is an appropriate time to lift rates else the US may risk over heating which would undo the positive work of the accommodative monetary policy to date.
Today sees a barrage of FOMC members taking the podium, including the Chair of the FED, Yellen. Markets will scrutinize every word for further clarification on whether a March rate hike is on, if members and more importantly Yellen are hawkish and talk up a March rate hike we would see the USD strengthen further as equities and commodities fall as we enter the weekend. However, a more dovish tone will see the USD give back its recent gains with commodities and equities extending higher.