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Oil and USD rally heading into a busy day for economic data and central bank news – CMC Markets

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Markets spent Wednesday digesting recent moves and preparing for a flurry of major announcements due between now and the end of the week. Indices were steady with the Dow holding above 22,000, the NASDAQ 100 remaining stuck below 6,000 and the S&P sitting above its 2,492 breakout point but below 2,500. 

Currency markets saw the US Dollar rebound, gaining 0.3% against CAD, 0.4% against JPY and gold, 0.5% against GBP, 0.6% against EUR and AUD and 0.7% against NZD. The Kiwi Dollar remains active ahead of next week’s election, while the Aussie dollar could be active around today’s Australian employment report where job growth is expected to slow to 20K. The full-time, part-time split could attract attention as last month’s increase was driven by the more volatile part-time component.  

Sterling pulled back against other major currencies except for EUR, after jobs increased more than expected but wage growth came in soft which offset some of the pressure on the Bank of England to do something that increased earlier in the week after other inflation measures exceeded expectations. 

With the Bank of Canada having raised interest rates at its last two meetings, the Fed preparing to start running down its balance sheet and the ECB set to talk tapering as soon as its next meeting, stimulus policies at other central banks have come under scrutiny. Thursday the Swiss National Bank and the Bank of England are holding meetings. The SNB is likely to do nothing but with EURCHF rallying from 1.0600 to 1.1500 in recent months, it could have room to start backing off its negative interest rate in the coming months. 

At the Bank of England, there have been hawkish rumblings but only 2 hawks cast dissenting votes at the last MPC meeting. The BOE may come under more pressure to at least take back last year’s rate cut but that move may not come this week. Traders may focus on whether there are any more hawkish dissenters or  any hawkish hints from stand pat Governor Carney. 

In commodity trading, US Crude oil continued to rebound gaining 2.2% while gasoline fell 0.6%. Traders appear to be viewing the higher than expected build in DOE oil inventories and the bigger than expected drop in DOE gasoline inventories as transitory. Trading action also suggests that traders view last week as the point of maximum disruption and have started to look past the storms, focusing instead in the IEA’s increase to its global oil demand forecast. 

Copper and other resource markets could be active during today’s Asia Pacific trading session with retail sales, industrial production and other economic reports due from China. 

Thursday also brings US inflation numbers which could impact trading in USD and other currencies potentially sparking another round of speculation heading toward next week’s Fed meeting. 

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