Here are the latest developments in global markets:
- FOREX: Safe-haven currencies continued to benefit from risk aversion, with dollar/yen diving below the 106 key level near one-week lows, last trading at 105.64 (-0.65%). From the one hand, political turmoil in the US was pressuring the dollar after the Washington Post newspaper reported yesterday that the US President has decided to fire his national security adviser, H.R McMaster and was discussing further potential replacements. On the other hand, demand for the yen was also rising on the back of suspicions surrounding the Japanese Finance Minister over his complicity in a state-owned land sale affair. The Swiss franc, another safe asset, was also increasing its positive momentum driving dollar/swissie down to an intraday low of 0.9484 (-0.16%). Euro/dollar crawled up to a high of 1.2335 (+0.13%), in the wake of headlines stating that the US was planning to scrap its punitive import tariffs against Europe. Pound/dollar jumped to 1.3980 (+0.23%) with investors being optimistic that the EU and the UK would strike a deal on the transitional period at next week’s summit in Brussels. Remarks by the rating agency Moody’s regarding the UK economy, however, were not so encouraging as the agency argued that the country will struggle to deliver the public spending cuts it has promised in order to bring down its overload budget deficit. Dollar/loonie reached a fresh 8 ½ -month peak of 1.3090 (+0.09%), underpinned by Trump’s strict views that the US has a trade deficit with Canada. In antipodean currencies, aussie/dollar and kiwi/dollar were struggling and were unable to gain from the dollar’s weakness as any escalation in US-China trade tensions could have a negative influence on the currencies given the country’s heavy export reliance on China. Aussie/dollar and kiwi/dollar were last trading at 0.7760 (-0.50%) and 0.7240 (-0.51%) respectively.
- STOCKS: European stocks edged up on Friday supported by positive corporate news but were on track to finish the week in the red as investors were cautious on risk asset purchases amid heightened trade tensions. The pan-European STOXX 600 was up by 0.08% at 1050 GMT, with energy and telecommunications leading the index. Among companies included in the index, the exchange operator NEX Group was the best performer, with its shares rallying at the time of writing by 31.62% after its US-based counterpart CME Group offered to take over the company. The blue-chip Euro 50 increased by 0.39% with all sectors being in the green. The German DAX 30 climbed by 0.53%, the French CAC 40 climbed by 0.07% and the Italian FTSE MIB picked up by 0.09%. UK’s FTSE 100 improved by 0.21% and the US stock futures were mixed.
- COMMODITIES:Oil prices extended today’s uptrend but headed for a negative weekly close as worries about the US rising oil production and whether this could hamper OPEC’s efforts to curb oil supply remained a drag on the markets. WTI crude and Brent stood at $61.35 (+0.26%) and $65.18 (+0.09%) per barrel. In precious metals, risk-off sentiment gave a lift to gold, sending the yellow metal to $1321.31 (+0.42%) per ounce.
Day ahead: US data flow continues; US politics in the spotlight
US data will continue to dominate the calendar today ahead of a relatively quiet week for economic releases out of the US. However, today’s numbers are expected to have a little impact on the FOMC rate decision announced on Wednesday, while any updates on the trade story could give another round of volatility for the dollar before a crucial G20 meeting kicks off between March 17-20.
At 1230 GMT, February’s building permits are expected to ease to 1.320 million contracts after reaching a multi-year high of 1.377 million in the previous month. Housing starts, delivered at the same time are also estimated to come in lower in the aforementioned month. On the other hand, readings on industrial production which slowed down by 0.1% in January are now anticipated to grow by 0.3% in monthly terms. Finally, JOLTs job openings for the month of January and the University of Michigan consumer sentiment index for the month of March (preliminary) will inform on the US new vacancies and consumer confidence at 1400 GMT.
While encouraging numbers could bode well for the dollar, positions on the currency could be on the defensive since concerns over a global trade war continue to hang in the background. The recent staff changes in the White House, including the resignation of the economic adviser, Gary Cohn, and the firing of the Secretary of State, Rex Tillerson, and now whispers of a potential departure of the national security adviser, Herbert McMaster, left investors scratching their heads about how serious Trump is about taking a punitive trade stance against the rest of the world. Therefore, any political news that could worsen the already negative sentiment, could offset any gains arising from potentially positive data.
Next week, it will be interesting to see how FOMC members, who will meet to decide on monetary policy between March 20-21, will respond to the trade turbulence. Note that the markets are widely expecting the Fed to pick up rates next week, however, considering the chaos in the White House, we wonder whether the FOMC board will adopt a dovish stance on the country’s economic outlook.
Meanwhile in Canada, January’s manufacturing sales will attract attention at 1230 GMT, while in energy markets, traders will be waiting for Baker Hughes to report on the US oil rig count at 1700 GMT.