Markets Steady Ahead of Big Data
Global equities had a relatively quiet start to the trading week yesterday as investors prepared themselves for some big inflation data releases in the coming days. The 3 major US indices all finished the day close to flat, although still near record highs, the Dow dropped just 0.04%, the S&P 500 lost 0.22% and the Nasdaq added a miserly 0.02%. US Treasury yields remained bid, the rate sensitive 2-year gaining 3.5 basis points to trade up to a near a 3-month high at 4.725% and the benchmark 10-year added 2.1 basis points, up to 4.282%. The greenback once again bucked the trend from the yields and dropped off, losing 0.2% on the Dxy with the Euro grinding up to the 1.0850 level. Oil prices perked up as shipping disruptions increased concerns, Brent rising 1.11% to $82.53 a barrel and WTI gaining 1.43% to jump to $77.58 a barrel. Gold retreated further into its range, dropping to $2,025 during the day before finishing around the $2,030 level.
Inflation Data in Focus for the Week
Markets have been fairly quiet for the first few trading sessions of the week as investors turn their attention to key inflation data and potential monetary policy changes in the days ahead. The highlight of the week is no doubt the Federal Reserve’s favoured inflation indicator the PCE Price Index out on Thursday but numbers out in Japan, Australia and Europe will carry equal interest for FX traders looking for the next interest rate differential long-term trade. ECB President Christine LaGarde again last night reinforced their focus on inflation, within the last 2 weeks, markets have brought yearly rate cut expectations for the ECB in line with those of the Fed , so a variance in the two numbers later this week could see the EurUsd break out of recent tight ranges.
Event Calendar Starts to Pick up Today.
It was a quiet event calendar for traders yesterday, but things have already picked up today in the Asian session with the release of some key inflation data in Japan. The CPI number was expected to come out just under the BOJ’s 2% target for the first time in 2-years, but actually printed dead on that figure. However, this print could still scupper hopes of an imminent rate hike in the land of the rising sun and put further pressure on the Yen which is already languishing at low levels against the greenback and on the crosses. There is little on the calendar in the European session but the first tier 1 data out of the US is due once the New York session kicks off. Durable Goods numbers are due early in the day and these are then followed by the CB Consumer Confidence data print. Once again, any stronger than expected results are likely to push the chances of a Fed rate cut further down the line.
