US equity markets continue to be sold off as an ever growing cautious sentiment creeps into the markets with key risk events drawing ever nearer. The DJIA finished down 0.2%, the S&P 500 lost 0.18% and the NASDA 100 bucked the trend to close with a slight gain of 0.05%.
In FX, the USD index has tapered off as it consolidates after mixed to positive data failed to stir any bullish optimism in the USD as all eyes fall on today’s data and all-important FOMC statement. The JPY strengthened yesterday but to a lesser degree than previous days as it seems the current risk sentiment has been priced in and markets tread carefully ahead of tonight’s BOJ Monetary Policy statement. The AUD has also entered consolidation as we await important data regarding Employment Change and the Unemployment rate in tonight’s Asian session.
In commodities, we are seeing gold continuing to rise as traders turn to the ultimate safe haven vehicle ahead of today’s key risk event with gold managing almost a full retrace of last month’s losses as it peaked just above 1290. Crude, continues to be punished as markets take profits and unwind positions in what has been an over optimistic speculative environment in which players priced in an oil supply reduction which looks more and more unlikely in combination with a seasonal dampening of demand as the summer months begin to heat up.
Todays key data is highlighted by the FOMC and the BOJ. The FED is due to release its federal funds rate, expected to remain unchanged and its Economic projections, statements and Press conference. The FED has caused a stir in markets lately with Fed Chair Yellen initially raising hopes of an interest rate hike only to see them dashed, causing wild swings, as economic data dictates that the time is not right for a hike. Should a rate hike take place today or should any releases from the FED be of a hawkish tone, which alludes to a very imminent increase in rates, we would see the USD power up and strengthen across the board with equities and commodities tumbling aggressively as markets price in the new information. On the other hand, should the FOMC continue with a dovish tone, we would see markets further devalue the USD while equities and commodities moving higher as the period of inflationary growth continues.
The BOJ will be another event to keep an eye on as the BOJ releases its Monetary Policy statement and Press conference in which the outlook for Japan and the future monetary policy of the country is analysed and forecasted. The BOJ has been threatening to take measure in an ongoing attempt to bolster the economy with a clear inflation figure in mind which is currently being threatened by a strengthening JPY as markets continue to buy the JPY for its safe haven values. Should the BOJ loosen monetary policy further, we would see the JPY weaken across the board as the NIKKEI picks up steam. However, if the bank takes no action or is dovish in its tone, we would see the JPY strengthen across the board as investors feel safer driving the JPY up.
Todays Economic Data:
- Average Earnings Index 3m/y expected at 1.7%
- Claimant count Change expected at -0.1K
- PPI m/m expected at 0.3%
- Crude Oil inventories previously at -3.2M
- Manufacturing Sales m/m expected at 0.7%
- BOC GOV Poloz Speaks
- GDT Price Index previously at 3.4%
- GDP q/q expected at 0.5%
- Employment Change expected at 14.9K
- Unemployment Rate expected at 5.7%
- RBA Deputy Gov Lowe Speaks
- Monetary Policy statement
- BOJ Press Conference