Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
You can access both of our platforms from a single Saxo account.
NY Open: Wall Street shrugs off its worries
Michael O’Neill
FX Trader, Loonieviews.net
Summary: Wall Street is whistling a carefree tune today, but markets are keeping a cautious eye on the FOMC. In Canada, the loonie climbed somewhat in the wake of the BoC holding rates steady.
The Dow Jones Industrial Average popped at the open, along with the S&P 500 and Nasdaq. The DJIA soared 5.7% since touching 22,638.41 on January 3. The fear and loathing that followed the Federal Reserve rate hike on December 19, and Fed chair Powell’s apparent lack of concerned about the carnage in equity markets, has traders throwing caution to the wind.
"All is for the best in the best of all possible worlds" appears to be the message out of Manhattan again today, leaving us to wonder which unpleasant late-cycle reality will spoil the party first.
Traders are expecting to get some clarity on the Federal Open Market Committee’s outlook when the minutes are released this afternoon. Above all, markets want to find out whether the Committee unanimously shared Powell’s original hawkish bias, or if the chair's January 4 comments were a more accurate view of the bank's thinking.
If this mornings’ session is any guide, traders are leaning toward the latter.
FX markets are in “risk-seeking” mode. The US dollar sank across the G10 major currency spectrum since the New York open, led by gains in NZD and EUR. The "dovish Fed" bias was reinforced earlier after St. Louis Fed President and noted dove James Bullard said "we’ve got a good level of the policy rate toda”, and there isn’t any pressing need to go higher.”
EURUSD climbed from 1.1441 to 1.1531, which turned some technical studies bullish; these are looking for a break of resistance at 1.1550 to signal further gains ahead.
The Bank of Canada left interest rates unchanged which was expected. The statement was dovish. The BoC is concerned about slowing global economic growth from the ongoing China/US trade talks, and a “material” drop in oil prices. It trimmed its 2019 GDP growth forecast to 1.17% from 2.1%.
USDCAD dropped to 1.3182 alongside the US dollar weakness and a jump in WTI oil prices to $51.46/barrel but bounced to 1.3210 as traders digested the latest monetary policy report.
"All is for the best in the best of all possible worlds" appears to be the message out of Manhattan again today, leaving us to wonder which unpleasant late-cycle reality will spoil the party first.
Traders are expecting to get some clarity on the Federal Open Market Committee’s outlook when the minutes are released this afternoon. Above all, markets want to find out whether the Committee unanimously shared Powell’s original hawkish bias, or if the chair's January 4 comments were a more accurate view of the bank's thinking.
If this mornings’ session is any guide, traders are leaning toward the latter.
FX markets are in “risk-seeking” mode. The US dollar sank across the G10 major currency spectrum since the New York open, led by gains in NZD and EUR. The "dovish Fed" bias was reinforced earlier after St. Louis Fed President and noted dove James Bullard said "we’ve got a good level of the policy rate toda”, and there isn’t any pressing need to go higher.”
EURUSD climbed from 1.1441 to 1.1531, which turned some technical studies bullish; these are looking for a break of resistance at 1.1550 to signal further gains ahead.
The Bank of Canada left interest rates unchanged which was expected. The statement was dovish. The BoC is concerned about slowing global economic growth from the ongoing China/US trade talks, and a “material” drop in oil prices. It trimmed its 2019 GDP growth forecast to 1.17% from 2.1%.
USDCAD dropped to 1.3182 alongside the US dollar weakness and a jump in WTI oil prices to $51.46/barrel but bounced to 1.3210 as traders digested the latest monetary policy report.
Latest Market Insights
Quarterly Outlook 2024 Q3
Sandcastle economics
-
-
Bonds: What to do until inflation stabilises
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.
-
Equities: Are we blowing bubbles again
Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.
-
FX: Risk-on currencies to surge against havens
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.
-
Commodities: Energy and grains in focus as metals pause
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.
-
The rise of populism: Far-right parties will influence the future
The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.
-
Investing in China: Navigating Q1 amid economic challenges
Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.
Disclaimer