Markets look to Central Bankers

27 June, 2017

Asian Equities traded higher on Tuesday approaching near two-year highs on Tuesday as USD strength helped exporters and traders are expecting Federal Reserve Chair Janet Yellen to make positive comments to support the Fed’s projection for one more interest rate rise this year. Yellen is due to take part in a discussion on global economic issues at London’s Royal Academy today. In addition, several of her Fed colleagues are due to speak later in the day.

U.S. durable goods data, released yesterday, was -1.1% which was worse than expected. As a result, this further adds to concerns about the strength of US economic growth after the recent rout in the oil market and indicators that inflation is not strengthening. Many traders are concerned that the Fed has an overly optimistic view of the economy as it sets its strategy for further interest-rate increases. Overnight treasury yields dipped lower but USD remained relatively strong with USDJPY trading at 111.65 and briefly rose to a 1 month high of 112.071.

Following ECB President Draghi’s defense of the easing in European Central Bank monetary policy EURUSDremained steady at 1.1200 close to an 11-day high set overnight of 1.12036. GBPUSD moved less than 0.1% higher to currently trade at 1.2735. If the current trend continues then GBPUSD will attain a fifth straight daily gain, which would be the longest winning streak since early December.

Oil appears to be on track for a fourth consecutive daily rise even with continued concerns around a persistent global over supply. WTI was trading at $43.65 a 0.2% gain from yesterday but is still likely to suffer a 10% loss for the month. Brent was holding steady trading around $46.25pb.

And finally, Gold – which saw an unprecedented spike in volume at around 9:00 BST yesterday which saw Gold fall 1.6% to $1,236.50 an ounce on Comex. It is strongly believed this was an “erroneous” trade or “fat finger” event where trading jumped to 1.8 million ounces of gold in just a minute! This equates to more than the gold reserves of Finland! Following the short lived dip Gold subsequently recovered trading at $1,251 this morning.

Markets will be paying attention to speeches from ECB President Draghi at 9:00 BST, BoE Governor Carney at 11:00 BST and Fed Chair Yellen at 18:00 BST all of which are likely to cause a certain degree of “knee jerk” reaction in the markets.

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