Data and Fed Expectations Continue to Pressure Stocks
US Stock markets remain under pressure as data and more Fed speak continue to push rates to remain at higher levels for longer. Last night more hawkish rhetoric from FOMC and strong data led to more pressure on the major indices, the Nasdaq lost another 0.52%, the S&P dropped for a fifth straight session, the first time since October, losing 0.22% and the Dow managed a tiny 0.06% improvement. The Dollar pushed slightly higher, the Dxy gaining 0.2% on the day as yields once again edged north, the 2-year adding 5.6 basis points to 4.988% and the 10-year up 5.2 basis points to 4.637%. Oil was relatively quiet as traders continued to monitor updates from the Middle East closely, with Brent down 0.2% to $87.11 and WTI up 0.1% to $82.73 per barrel. Gold gained 1% to trade back to the $2,385 level but remains in recent ranges.
Yen Levels Still in Focus for FX Traders
FX Traders are continuing to focus on key UsdJpy levels as we approach the weekend and enter lower liquidity trading conditions later in the day. Japanese officials have been ‘jawboning’ throughout the week and the pair is sitting just below the crucial 155.00 level and a break here could see them enter the market as they have been threatening to do. Midweek talk of concerted efforts from the US, South Korea, and Japan to smooth FX volatility clearly didn’t make it to the notepads of Fed officials, who once again turned more hawkish overnight which could prompt more topside moves for the UsdJpy from an interest rate differential point of view. Expect traders to become more nervous into the New York session today if the pair is anywhere near 155 and the dollar is appreciating across the board.
Markets on the Alert into the Weekend
It has been a tough week for investors this week with stocks and overall risk trades under pressure after a more hawkish Fed and strong data hit US markets. The macroeconomic event calendar is pointing to quieter last few sessions of the week, but traders are aware that fresh tensions in the Middle East could spark at any point and Yen traders are wary that it is sitting at historically low levels against the dollar. There is nothing of note due out in the Asian session, but the London session once again has a focus on the UK with the latest Retail Sales numbers due out. The New York session yet again has a focus on central bankers with MPC members Breedon, Ramsden, and Mann all scheduled to talk as well as German Buba President Joachim Nagel.
