Aussie fails to kick on, While Sterling rallies hard

January 23, 2014

A pretty boring night really on stocks unless you are an IBM shareholder with Big Blue down 3%. Indeed MarketWatch reported that Jonthan Krinsky, Chief Market Strategist at MKM Partners said that “today (overnight) is the 4th narrowest range for a non-holiday week in the last 5 years”.

So at the close the Dow down 0.25% to 16,373, the Nasdaq up 0.41% and the S&P 500 up 0.07% to 1845. This is the highest closing level in the Nasdaq since July 2000.

In Europe stocks were down across the board with the FTSE off 0.12%, the DAX lost 0.10% while the CAC in Paris eked out a tiny gain of 0.03%. In Milan stocks fell 0.19% while in Madrid the early 2014 strength in the Spanish market reversed a little with the IBEX 35 falling 0.75%.

Locally though the sell off continued after Iron Ore prices tumbled and took mining shares with them yesterday. In overnight trade on the ASX the SPI 200 March contract fell 21 points to 5258 bid with the miners weakness yesterday no doubt weighing on the market once more. The big inflation print yesterday has knocked hopes for any more rate cuts which also weighed on stocks.

But it was not quiet on FX markets which saw a couple of decent moves over the past 24 hours.

The big mover was sterling which drove sharply higher after the unexpectedly improvement in employment with the unemployment rate falling to 7.1%. GBP is up 0.63% to 1.6576.

As we discussed yesterday the fundamentals for the UK economy relative to those of Europe bias EURGBP lower. Last nights stunning rise in GBP saw a huge drop in EURGBP

Further downside beckons.

Euro is around the same levels as yesterday at 1.6546 while the Yen sits at 104.46. The Aussie is much stronger over the past 24 hours after the inflation data yesterday saw a very strong rally away from prices which were back near 3 year lows. Interestingly there was no real follow through buying overnight and the Aussie sits at 0.8853 this morning.

The AUD rocketed higher yesterday after the big uptick in inflation but it wasn’t able to sustain the break of the old trendline it broke down through a week or so ago.

This suggests that the bears still have control over the market but looking at my charts and the Aussie needs to break last nights high at 0.8887 to kick on.

On commodities Morgan Stanley cut their gold forecast overnight to $1160 for 2014 and $1138 in 2015. It didn’t have too much impact on prices though as Gold rests around $1240 oz this morning. Crude was up another 1.91% to $96.78 while copper sits at $3.37 lb. The Ags were fairly quiet with Corn up 0.29%, soybean 0.04% while wheat fell 0.18%. Bitcoin sits at $935.

On the data front it is going to be a big day with the release of the preliminary HSBC Chinese PMI and then a raft of PMI’s around the world tonight. In the US jobless claims will be important tonight.

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