We saw some consolidation across the financial markets over the course of yesterday’s trading as the recent trends retraced slightly ahead of key risk events approaching later in the week. The dollar appreciated across the board against the other major currencies with the DXY pulling back 0.3% on the day, and for the first time in a while we saw a sea of red across the equity markets as we moved into the new trading day. This by no means signals a turn in sentiment but does probably indicate that the market is happy to wait ahead of this week's big risk events before continuing with the recent trend.
The Aussie dollar was the strongest performing of the currencies against the greenback and in fact the ASX 200 was the only equity market to show good strength yesterday, finishing up 0.42% on the day. The other commodity currencies also held up well with CAD showing some resilience in line with the continuing strength in the oil price, and NZD has found a slight bid this morning after the Trade Balance numbers came out slightly better than expected.
Looking ahead today and it’s another quiet day in terms of fundamental economic data before we launch into a busy few days. It’s all second and third tier data due in the Asian and London sessions but we do have some tier 1 numbers due in the US in the form of the CB Consumer Confidence data with expectation sitting at 123.0.
Other key themes dominating the market at the moment before we hit the key US events of the Fed, State of Union speech and the Nonfarm Payrolls, are the continued debate and speculation around the Brexit and the NAFTA agreements. Sterling was off hard yesterday as sentiment turned once more against a positive outcome for the UK in Brexit negotiations with a recent government survey concluding that the UK will be worse off economically in all its predicted scenarios. This all puts further pressure on PM May’s position as she heads off to China for a 3 day visit. The sixth round of NAFTA talks closed out with no real progress, although the fact that a seventh round is due is seen as a positive outcome.
So for today, I think we’ll see a continuation of this consolidation across the board with traders looking ahead at the plethora of risk events and opportunities coming into the last few days of the week.