Currencies
EUR/USD – even though the data out of the US wasn’t good, the USD strengthened and we saw the pair extend the drop until late afternoon, when it started to correct slightly upwards. We have more data out of Eurozone and the US today, but as mentioned already a few times, tomorrow will be the main event, even though there won’t be important data out of Eurozone tomorrow.
USD/JPY – is still trading in an ever tighter range as we can expect a breakout of the pattern tomorrow, due to the important day Friday promises to be. We will start today with some US data, and then overnight we will have Japanese inflation data, to be followed tomorrow by the US GDP and afterwards the speech by FED Chair Yellen.
GBP/USD – while the USD strengthened yesterday across the board, the major exception was against the GBP. It was trading lower in the morning, but as has been the case in recent days, in the course of the morning there is a turnaround and we see the pair move higher again. This morning we once more see a drop, so it will be interesting to see if we see the same thing happening again.
USD/ZAR – moved sharply up as the inflation data out of South Africa was weaker than expected, as well as a strengthening of the USD. However, the main reason we moved up was the fact that is was reported that the South African Finance Minister could be rearrested again.
Indices
S&P 500 – saw the largest loss since the beginning of the month, as the USD strengthened, and also oil dropped further. In case Yellen’s comments tomorrow will be interpreted as hawkish, we can expect the S&P to drop further as that would bring a rate hike closer. At the moment the nearest support can be found around the 2167 level.
Commodities
Gold – moved sharply down yesterday and broke below the support whish was in place in recent weeks around the 1332 level and reached the lowest level since the last FOMC statement. Tomorrow we are expected to see a lot more volatility with the GDP data out of the US and the much anticipated speech by Yellen at the Jackson Hole Symposium. The big question is if she reiterates what several senior FED members have said in recent days, or if she strikes a different tone.
Oil – dropped after the inventories confirmed the API data that there was an increase in the inventories, albeit not as large as the API figure. Nonetheless, production dropped slightly compared to the previous week, which saw a large increase in production. Gasoline inventories also increased, while a decrease was expected. All of this contributed to a decline of the oil price, and in addition the USD also strengthened a bit.
Regarding the OPEC meeting next month, one other issue we have to take into consideration, besides the ones mentioned earlier this week, is that it was mainly Saudi Arabia which was against cutting production or freezing production in order to gain market share. With Saudi production at record levels, it remains to be seen how much more it can produce, so from that perspective a freeze makes sense, but that could move oil higher, which in turn would bring back US producers. When that happens, it is likely that this would hurt not only the oil price again, but also the Saudi market share. From that point of view, the best course of action from the Saudi perspective would be to not agree to an official production freeze, but rather a de facto production freeze.
Stocks
Teva – dropped sharply after Mylan (NASDAQ:MYL) successfully fought Teva’s patents on one of its flagship drugs – Copaxone. The fight is about the new dose for the drug, and so far Teva has lost 2 of the 4 rulings, although it has already said it would fight these.