Central bankers and IMF drive markets – Euro lower, Sterling roars as Aussie drifts and gold rallies

February 13, 2014

If you can drag yourself away from all the sport overnight with Shaun Marsh’s ton, Torah Bright’s Silver, the Sydney FC v Melbourne Victory clash and the IPL auction you will see that there was some very interesting macro occurrences last night that may inform some longer term trends over the months ahead.

First cabs off the rank were the ECB and Boe which both surprised markets.

ECB Board member Benoit Coeure said that the ECB was actively considering negative interest rates while in the UK the Bank of England surprising upgraded its growth forecast from 2.8% to 3.4% while keeping their inflation outlook unchanged.

Not hard to guess what the impact was as Sterling surged to 1.6590 up 0.89% while Euro fell to 1.3594 down 0.32%.

Elsewhere some unsolicited advice from the IMF knocked the Aussie dollar ever so slightly saying that it should fall toward the low 80 cent region and also saying that rates should stay low and the budget surplus a goal to be pursued. So after yesterday’s rally on the back of the Chinese data that showed exports and imports crushed expectations drove it to a high of 0.9067. It sits this morning at 0.9021.

USDJPY is lower as well down 0.16% at 102.46 this morning.

On the stock market European traders liked the comments on negative interest rates (leaving aside what that implies for growth and earnings – yes we know logically inconsistent) and the DAX was  up 0.65%, the CAC up 0.53% and the FTSE MIB in Milan rose 1.30%. Stocks in Madrid fell 0.10% and the FTSE in London lagged the continental bourses due to fears of a change in the BoE’s accommodative interest rate policies with UK 10 year gilts up 8 basis points to 2.82%.

In the US early strength gave way to weakness with the Dow down 0.19%, the S&P off a point to 1819 but the Nasdaq was 0.24% higher.

Locally on the ASX overnight the SPI 200 March Futures contract is up 8 points to 5270 bid. It’s make or break time for the SPI 200 as it is now testing trendline resistance dating back to the recent high in November 2011.

Clearly the SPI 200 is trying to break out of this little trendline that has been constraining the rise in the SPI 200 since the highs.  In overnight trade it pierced it but with the pullback from the highs in US markets it is back at the line in trade this morning.

It’s a multi-test line so its a good one a break or reversal will be instructive.

Gold’s rally continued and although it is off its highs it is up $5 an oz at $1291.70 this morning. The question that occurs to me though is gold ready for a pause?

We’ve been on this gold rally for some time but what does this chart suggest.

Okay a little hanging cross maybe? Not sure but yesterday was a strong rally and I have now bought my stop up to $1282 below yesterday’s low.

Nymex crude’s strength continued even though the EIA showed a much bigger build in stocks than expected and it rose a little to $100.25 Bbl. Copper rallied strongly on the Chinese data up 5 cents or 1.39% per lb to $3.31.

On the data front it is a huge day for markets in Australia with the release of the January employment report. The unemployment rate is expected to be unchanged by the pundits but jobs are forecast to rise by 15,000 ove the month. Guy Debelle, RBA Assistant Governor is also speaking today. Offshoe Chinese new loans will be interesting as will German CPI and jobless claims and retail sales in the US tonight.

Have a great day and good hunting

Greg

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