Markets Today: When doves cry

The AUD has flown back down with the 77 handle this morning, pulled back somewhat by a dip in oil prices for once, WTI down $0.59 to $43.60 and Brent off $0.91 to $44.89, the Aussie’s commodity cousins, the CAD, NOK, RUB and the NZD all lower this morning.

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The AUD has flown back down with the 77 handle this morning, pulled back somewhat by a dip in oil prices for once, WTI down $0.59 to $43.60 and Brent off $0.91 to $44.89, the Aussie’s commodity cousins, the CAD, NOK, RUB and the NZD all lower this morning.  The RUB was the under-performer, off over 2%, the others by 0.6-0.9%. US stocks edged lower and the VIX is up 0.59 to 13.85.

Elsewhere in the hard commodity space it’s been mixed, base metals mostly higher, the LMEX index by 0.13%, copper by 0.32% while nickel fell 2.41%.  Gold eased, by $3.80 to $1250.60.   The standout performer though has continued to be iron ore, the spot price jumping a staggering $5.69 to $70.46, up 8.48%, up 20.9% so far this week and up 82.9% from its 10 December low.  Chinese steel rebar futures though gave back 1.81% after its strong rally.

Other major currencies have moved little overnight in net terms, though the EUR has had a saw tooth pattern, rallying in the European session before pulling right back again as has the Pound.

The ECB came and went without any new ‘stimulatory’ measures announced and none was expected.  Draghi’s statement did initially reference that rates would remain ‘at present levels or lower for an extended period’ – catching the market’s attention – but this was later qualified.  Draghi also mentioned that loan dynamics were higher, initially lifting the EUR.  What also has caught the news wires’ attention was German criticism that negative rates don’t work.  And while he batted back some of this criticism (he said that the experience of negative yields had been broadly positive – i.e. credit and financial conditions remain easy) he said that there is no evidence that negative rate had been passed on, an implicit acknowledgment the ECB may have reached its lower bound.  Draghi weighed into the Brexit debate a little saying that the uncertainty had already had some market impact.

As far as the Pound is concerned, UK retail sales had a big miss, sales in March down a further 1.3% after a 0.5% fall in February, that was also revised lower a tenth.  This was followed inevitably by a degree of volatility in Sterling that sits at still among its highest levels for a fortnight at 1.432, still sensitive to more Brexit poll risk/rally.

Coming up

It’s not a major event day in our time zone with Japan’s Nikkei Manufacturing PMI a possible pick though without altering the course of the yen too much, if at all.  It’s expected to tick up to a less negative 49.5 from 49.1 in March.  Japan’s monthly tertiary industry index is also due.  Having said that, with the BoJ meeting coming up next week, the market might be a little more sensitive to data, should it be materially different from expectations.

In Europe, there will be interest in the preliminary Eurozone PMIs for April with an ever so slight improvement tipped for both the Manufacturing and Service indexes.

Ahead of the FOMC next week, it’s pretty quiet on the US calendar for data with the market more likely responsive to the on-going Q1 reporting season.

There will also be some focus on Canada with the release of their key CPI and retail sales reports for February, the market consensus tipping payback in sales, a decline of 0.8%, after the outsized 2.1% January rise.  Annual growth in the headline and core rate of CPI is tipped to edge back by 0.2%, headline to 1.2% and core to 1.7%.

Finally, vale Prince Rogers Nelson, truly one of the music recording world’s greats.

Overnight

On global stock markets, the S&P 500 was -0.50%. Bond markets saw US 10-years +1.96bp to 1.86%. On commodity markets, Brent crude oil -2.34% to $44.73, gold-0.3% to $1,251, iron ore +8.8% to $70.46. AUD is at 0.7738 and the range was 0.7733 to 0.7835.

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