US equities were not fazed by earning releases from several major players yesterday and only managed to post slight gains given the rally in the energy sector as crude oil prices climbed. The DJIA was weighed down by S&P downgrading Exxon`s outlook, closing with slight gains at +0.07%, the S&P500 gained 0.19%, while the NASDAQ 100 lost 0.15% as APPL missed its Q1 EPS forecast ($1.90 vs $2).
Asian equities traded mixed following subdued Wall Street trading and in light of the upcoming FOMC and BOJ meetings. APPLE`s missed EPS outcome also weighed on suppliers in the area, to give markets a bearish sentiment despite initial oil related gains, with the Nikkei 225 losing 0.6%, the ASX 200 losing 0.3%, while the Shanghai Composite gained 0.3% as strong Industrial Profits (11.1% vs -4.7%) kept the index bid.
In FX we saw the AUD being punished as a poor CPI data (-0.2% vs 0.2%) saw the AUDUSD trade over 100 pips lower, firmly below 0.7700. The NZDUSD weakened in early trade as the area experienced a slight dip in confidence and in preparing for RBNZ release of the official Cash Rate (2.25%) and the Rate statement which will outlining the future of the NZD economy.
The USDCAD has remained well supported, testing a break below 1.26 as crude oil continues to push higher and BoC sees trade improving on the back of a recovering global economy.
USDJPY pulled back from yesterday’s highs as markets take positions off in anticipation of tonight’s key risk event in which the BOJ is set to release its Monetary Policy Statement, Outlook Report and the much anticipated Press Conference in which the future of Japans economy will be analysed and discussed. It’s worth noting that BoJ Gov Kurada has attempted to instil a dovish tone in markets of late as the bank sees a strong JPY a threat to their long term goals. Other releases expected out of Japan are the Household Spending y/y (exp 4%), Tokyo Core CPI (exp -0.3%) and Retail sales (exp -1.4%) figures.
The EUR was slightly bid yesterday but could not hold onto all of its gains as worries over Greece and its inability to pay its debts continues to weigh on the currency. Today sees a significant flow of data out of the region in which we see the release of German Import Prices (exp 0.3%), EU Money Supply (exp 5%), EU private loans (exp 1.7%) and the EU Goods Trade Balance (exp -62.5B).
The GBP continue to strengthen day on day flirting with this year’s highs as concerns over Brexit begin to lighten as pro EU attempts are made by several politicians. Today’s Prelim GDP q/q figures, expected at 0.4%, will confirm the current bullishness in the GBP If it beats expectations but a poor figure will see the bulls run for cover as the bears have a momentary reprieve from the short squeeze.
Today’s key event is expected out of the US, which has been struggling in recent trade as the USD comes under pressure against its rivals. The FOMC Statement and Federal Funds Rate (exp <0.5%) is coming up which will finally give markets the tip off of whether the Fed has bitten off more than it can chew when it raised rates in DEC 15 and sighted at least 6 more increases this year, which have subsequently been revised to at least 3 this years. Many believe the Fed acted rashly and should not have raised rate in the first place, any change to the US policy makers outlook for rate increase will greatly impact the USD. If further rate increase are taken off the table, the USD will continue to fall heavily as US equities will sore. However, should a more hawkish tone be struck, we would see the USD strengthen heavily as US equities come off.
Crude oil Inventories are due to be released today, expected at 1.4M lower than last week 2.1M. Markets will watch this figure with bated breath as they decide what to do with crude given its recent bout of bullishness which has the commodity firmly placed to reach 50 USD/pbl.
All in all, today promises to be a day filled with volatility and plenty of trading opportunities.