Quiet Day for Markets – But Will it Last
It was a relatively quiet day in the markets yesterday, especially when you compare volatility with what we have seen over the last few weeks. Stock markets had a quite moribund day with very few international indices having moved over 1%, the major US indices closed the day on the downside but not excessively, the Dow down 0.1%, the S&P 0.2%, and the Nasdaq 0.5% in the red as investors continued to take profit in tech stocks. The US dollar bore the brunt of the renewed risk appetite in currencies, grinding lower 0.3% against all the majors as the day progressed even though we saw US treasury yields pick up – the 10-year closing the day on its highs above 3.57.
Dollar Dilemma Ahead for Traders
Investors are cautiously optimistic at the start of this week and every day that goes without another bank scare or market shock is helping with that outlook. Currency traders are faced with a bit of a conundrum at the moment, the dollar has been trading strongly in line with interest rate differentials over the last few months and recent market turmoil has hit that correlation and its safe haven status has dominated the direction in the last weeks. The puzzle to be solved is whether a return to normality – and stable markets – will lead us back to looking at a hawkish Fed once again that is much more concerned with inflation which will push the dollar higher, or whether the ‘risk on’ aspect of the trade will dominate, and the dollar depreciates.
Australian Data in Focus for Asian Traders
It’s another quiet day in terms of macroeconomic releases across global markets today and the sentiment is likely to have a greater influence on direction. However, Australian markets will be heavily focused on the CPI data due out at 11.30 am Sydney time. Market expectation is for a slight drop for the y/y number to 7.2% which is still well above where the RBA would like to see it and although there have been signs of slowing in the Aussie market, a stronger print alongside a calming in the recent global market turmoil could see pressure on the RBA to push a more hawkish stance.
