Markets are off to start the day with a whimper as data in China showing that Chinese home prices have begun to stabilise after more than a year of decline has not had the positive effect on commodities such as copper, oil and gold that it once would have. Commodity pricing, which also serves as a proxy for measuring risk appetite, have been stuck in a multi-year mire of significantly weaker pricing with no signs of this trend abating as copper in particular circles lows not seen since the height of the financial crisis in 2009. Driving the secular decline in commodity prices has been waning demand in China as well as the weaker global economic growth picture in general. The implications of these moves have been obvious for emerging markets and commodity exporters like Canada and Australia alike. With the greenback on a resurgence after its sharp correction in early October we continue to see the Kiwi and Aussie dollars under pressure with today being no different. Looking at Asia outside of increasingly dark economic picture in China, the Yen is currently trading flat versus the greenback giving back some of its earlier safe haven gains prior to the BoJ’s policy meeting on Thursday.
With this morning’s news of a shootout in Paris between police and individuals linked to the ongoing terror investigations, market sentiment in Europe has been restrained. After yesterday’s strong performance on the better than expected survey data, most European indices are giving back their gains while the common currency continues to plumb lows versus the USD. The sterling is also flat against the dollar after recent comments by the deputy governor if the BoE caused a short lived spike in the currency. Speaking in reference to the less than inspiring inflation data out of the UK along with market expectations that a rate rise on the part of the BoE may not be forthcoming until 2017, Ben Broadbent suggested that shifts in market expectations for a rate rise outlined by shifts in the yield curve do not reflect what the BoE might actually do. That instead broad inferences on BoE policy cannot be drawn by market expectations alone and that action on the part of the BoE may happen much earlier then what’s implied by the market.
Moving on to this side of the Atlantic, equity futures are suggesting that the S&P 500 will start the day unchanged. With FOMC member Dudely set to speak along with housing start and oil inventory data set to be released later in the day there will be a number of opportunities for action in the North American session today but as it stands in pre-market trading the tone has been quite subdued. Looking at the USDCAD there hasn’t been much movement in the pair for the last few trading sessions which is unique in a year in which intraday volatility has expanded three fold, with that being said the oil inventory data coming out later today could be a driver of activity, when considering that along with some of the gains seen in Brent crude during the European session there may be an opportune lift in the loonie that Canadian importers may want to position themselves with market orders for.
Further reading:
USDCAD
housing start