Markets Mixed on Lack of Data

Daily Analysis - 20/10/2015

Markets Directionless Ahead of Important ECB and BoC Meetings


The markets were trading mixed yesterday as lack of any clear data saw momentum direction keep steadily flat. The only notable event was the US NAHB housing data which showed an index of sales for the next 6-months hitting the highest level since August 2005.

Equities Gain as Commodities Weaken

US equity markets continued to trend higher as the S&P500 futures posted a new one month high near the 2025 region, with the US earnings under way. The commodity markets on the other hand were weak on Monday with gold declining -0.62% for the day to close at 1170.59. Crude oil futures also declined -2.29% to settle the day at $46.17. Mining giant Glencore was back in the red on mounting fears that their rising debt of nearly 20 billion Pound Sterling meant that the company wouldn't be able to cope with weak commodity prices. Shares in Glencore fell over 5% yesterday.


RBA Monetary Policy Minutes

The RBA's monetary policy meeting minutes released earlier today showed that the Australian Central Bank was is no rush to cut rates during their recent meeting. The minutes revealed a more upbeat tone from the RBA in regards to the Australian labour market conditions, which were described as strengthening over the recent months and better than initially expected. On the housing markets, the RBA noted that there was a degree of comfort in signs of easing despite an increase in the dwelling prices. Risks from a global economic slowdown, namely China proved concerning. For growth forecasts, the RBA is expected to see a decline in GDP in 2016 to 2.75%, from 3.0% previously. The Australian dollar did not react much to the RBA's release as the currency initially posted a session low to 0.7214 before pushing towards the session high at 0.7274.


British Pound Look to Carney’s BoE Speech

The British Pound has been consolidating for the past three sessions daily after prices rallied to a 16-day high at 1.5476. There are no major economic releases scheduled for the British Pound today and markets are likely to focus on the speech by BoE Governor Mark Carney who is expected to testify before the UK's Treasury Select Committee. Ahead of Carney's speech, BoE MPC member and noted hawk Ian McCafferty is also due to speak at an event in London. McCafferty voted for a 25bps rate hike in the past two BoE's monetary policy meetings. The markets are likely to react more to comments from the Governor, who in past occasions has expressed concerns for a higher exchange rate’s effect on inflation in the country, which has remained stagnant near 0%.


Fed Chairwoman Yellen to Speak

FOMC members Dudley and Powell are due to speak today followed by Fed Chair Janet Yellen at an induction ceremony in Washington D.C. The FOMC has so far remained undecided on interest rate hikes with the consensus currently inclined to the dovish camp. The markets would be paying attention to Ms. Yellen's remarks on the Fed's rate hike plans ahead of next week’s FOMC meeting, where it is widely expected for the Fed to hold rates steady in October in light of a weak NFP print in August and September. The US Dollar is attempting to post a recovery especially on USDCAD where prices have recovered off the lows at 1.285 to currently trade at 1.3034.


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