We saw another good day for the global equity markets yesterday as they continued to grind higher with the S&P 500 index hitting new record highs. The dollar continued to slide across the majors and against most EM’s as we saw further correction flows away from the haven trades that have dominated the last couple of weeks. The US Dollar Index is now trading back down around 95.25 as we start the Asian trading day having reached highs near 97.00 just a week ago, the market is now assessing whether this is a natural correction before we resume the move to the topside of if we’re seeing a change in the greenbacks medium term direction.
Things are once again looking a bit tricky for President Trump on the domestic front after his former lawyer pleaded guilty to illegal campaign finance charges with regard to hush payments made to one of the presidents past lovers and the presidents former campaign manager was found guilty of eight counts of tax and bank fraud charges. It remains to be seen how this whole drama will play out and the markets did react with a slight risk sell off on this news, but in general if we see more uncertainty on this subject there is a good chance that investors will once again look to haven trades as their best option.
President Trump is not the only world leader in a bit of trouble, Australia is once again in danger of seeing another PM deposed by his own party with Malcolm Turnbull still fighting for his position after yesterdays leadership challenge. Once again, political uncertainty is not usually regarded as a good thing for a country’s economy or it’s currency but in this case international factors should continue to dominate currency flows with the Aussie dollars position as a risk proxy outweighing the domestic political situation in the short term.
This morning we saw Kiwi retail sales numbers jump to the topside with a 1.1% print against the expected 0.4%, the kiwi dollar jumped north in a knee jerk reaction to 0.6720 but has now settled back to trade around 0.6700. It’s quiet for the Asian and London sessions in terms of economic data releases and once again investors will be focussed on the news wires for any fresh news on the political situation in both Australia and the US as well as the usual trade themes.
Later in the day things should start to get much more interesting as the New York sessions gets going. First up we have the Canadian Retail Sales number due out, swiftly followed by the crude oil inventories. But the main focus of the day will then be the FOMC’s Meeting Minutes, with recent presidential comments still hitting the market and the Feds Jackson Hole Symposium coming at the end of the week, investors will be paying even closer attention to the contents. It should be an interesting day ahead for the markets.