The greenback is up against the majority of its major counterparts today as a spate of fundamental releases disappoint in Asia and across the Eurozone. German unemployment missed expectations meaning the EURUSD dipped, while Swiss gross domestic product (GDP) fell short on a quarter over quarter basis – meaning the USDCHF also declined. Without any real market movers scheduled for the rest of the day expect some consolidation heading into Thursday’s trading.
The latest news out of the UK suggested that the retail sector is not as strong as first thought with the CBI distributive trades survey missing expectations, reported at 16 versus a forecast of 35. The news has left the sterling down versus the dollar, and with a big day coming up tomorrow as far as he US is concerned there may yet be more weakness to come in the GBPUSD. Look for a better than expected employment situation in the US (reported on Thursday) to compound today’s losses in the GBPUSD and push the pair down further.
The Japanese yen has dipped slightly against the US dollar throughout the European morning session, and now stands relatively flat versus the remainder of its major counterparts. This is likely not going to be the case for long however, as the latest round of retail sales data is set for release out of Japan after the US market closes on Wednesday evening. Look for a better than expected release – above -3.3% – to weaken the Yen further.
Global markets are up across the board on Wednesday morning, as risk on sentiment (the willingness of market participants to take risks rather than hold money in safe haven assets such as gold) takes hold of investors. Look for Tuesday’s gains to repeat on Wednesday.
Asian markets are up across the board, despite the disappointing property situation that seems to have weighed on the Chinese and the Hong Kong markets as late. Look for further strength as the day matures and as key fundamental data comes out of both China and Japan.
Crude oil has started the day up slightly, after yesterday’s gains. Whether the strength will continue throughout the day remains to be seen, but expect it to mirror the situation in the US dollar. Since crude is highly correlated with the US markets, if equities gain throughout Wednesday trading (as is expected from the preopen trade) then crude will likely gain strength also.
Markets expected a bearish supply report on Tuesday, which did not turn out to be the case, so look for this to compound the US markets effect and boost the crude oil price as the day matures.
Gold has started the day up slightly after Tuesday’s losses, but don’t expect this to be the case for the entirety of Wednesday. As investor confidence strengthens in the US and Japan, market participants will shift capital from the lower risk assets such as gold and silver to the higher risk assets such as exotic currency pairs and developing nation investment. This shift will undoubtedly put pressure on the gold market as the day matures, so look for a similar pattern as displayed on Tuesday.
In the absence of any real market moving fundamental data on Wednesday the Dow is at the mercy of investor sentiment. At the moment – and as displayed by Tuesday’s response to the durable goods and consumer confidence releases – sentiment is leaning towards the riskier and bullish side of the market. For this reason we could see some large gains in the Dow and other major US indices today.