Busy day for data and testimonies Yesterday’s trading session got off to a relatively subdued start. However, this didn’t last long and there were a few early signs that investors were reassessing their appetite for risk. Gold and silver fell sharply overnight in a move that apparently signalled renewed investor confidence. Then the Japanese yen lost ground against both the US dollar and euro. As I have written on many occasions, when risk appetite is on the increase, market participants typically sell (or borrow) the low-yielding yen and use the proceeds to buy higher-yielding (and riskier) assets such as equities. This is what happened throughout yesterday’s trading session. However, it could be argued that it is rather bizarre to see investors loading up on riskier assets when the global geopolitical situation appears more unstable than it has for decades. After all, hostilities are breaking out throughout the Middle East while tensions are still running high in Ukraine. The euro did pull back from its best levels following the release of Euro zone Industrial Production. This fell 1.1% in May when compared with April, and was considerably below the consensus market expectation of a 0.3% rise. Overnight we had the minutes of the last Reserve Bank of Australia (RBA) monetary policy meeting, and New Motor Vehicle Sales. The Bank of Japan released its Monetary Policy Statement and held its customary post-decision press conference. Overall, the data was positive and there was nothing unexpected in either central bank utterance. However, European traders have decided to take the Aussie dollar lower this morning as there is a general feeling that the RBA wants a more competitive exchange rate. It’s a busy day data-wise. This morning sees the release of UK inflation data with both the CPI and RPI due out. Later on we have ZEW Economic Sentiment surveys for both Germany and the Euro zone. At the same time, Bank of England (BOE) Governor Mark Carney along with his deputy Andrew Bailey will appear before the House of Commons Treasury Committee to testify about the Bank’s Financial Stability Report. Then from the US we have Retail Sales, the Empire State Manufacturing Index, Import Prices and Business Inventories. In addition, US Federal Reserve Chairman Janet Yellen begins her two days of testimony in Washington. Today she appears before the Senate Banking Committee. It is also worth noting that Chinese GDP and Industrial Production numbers will be released early tomorrow morning.
Posted on: Tue, 15 Jul 2014 07:36:44 +0000
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