Markets buoyed on Debt Deal Optimism
Global markets enjoyed a positive day yesterday on the back of the optimism sparked on a debt ceiling deal in Washington DC. A host of major financial markets were closed for bank holidays, however futures markets ticked higher, S&P futures were 0.3% up and Nasdaq futures pushed 0.4% further north, these moves on top of strong gains on Friday when Wall St was last open. Treasury futures also took on a bid tone as traders start to further price in another rate hike from the Fed. The dollar had a relatively moribund session as FX traders took advantage of the holidays to put their feet up but expect things to start moving today.
Buy Dollars Wear Diamonds
It is an old adage from even older traders, but the long dollar strategy has certainly worked over the last few weeks. A combination of haven buying on a US default possibility and changing interest rate differential expectations have contributed to the move but FX traders are now questioning whether there is more in the move over the next few weeks. Expectations of a rate hike in June were sitting around 25% only a week ago and have jumped up to 63% now and this had correlated with moves in the FX and commodities markets, most notably in USDJPY and Gold. There are some key job numbers out of the US this week culminating in the Non-Farms on Friday and a cooling in that sector as well as a debt deal getting through both houses could see some of the recent moves corrected to some degree.
Markets Set to Move After a Long Weekend
Financial markets are set to kick into gear today after a long weekend for several major centres. The Asian market was open yesterday but a large part of the European and North American sphere was missing and so investors are expecting to see an increase in liquidity and volatility in markets today. The big news over the weekend was obviously out of the US regarding an agreement on the debt ceiling issue and further updates yesterday have been positive so expect that sentiment to lead as markets reopen. It is pretty thin on the ground in terms of data releases today in the Asian and European sessions, but we do have the CB Consumer Confidence data kicking off the tier 1 numbers in the New York session with the market expecting a 99.1 print.
