Stocks and the Euro lose ground as the Dollar Bloc re-emerges solidly

March 28, 2014

Stocks still look to me like the air is too thin for them in the US at the moment as markets and traders start to worry that the data flow was genuinely only disrupted by the weather and the economy remains strong. Otherwise it is difficult to find a cause other than our notion that the Fed warning of a continuation of the taper and eventual rate rises is weighing.

So in this vein it could be that the improvement of jobless claims which printed 311,000 from 325,000 expected and the third read of US GDP for Q4 2013 of 2.6% annualised simply reinforced the path that Fed Chair Janet Yellen articulated last week.

So at the end of trade the Dow fell 0.03%, the Nasdaq lost 0.54% and the S&P 500 lost 4 points to 1849 or 0.19%.

In Europe stocks were mixed.

In the UK the FTSE fell 0.26% after retail sales both during February and year on year blitzed expectations printing 1.7% and 3.7% respectively – maybe traders were worried about the BoE following the Fed but equally Glencores news they were closing the Ravensworth mine in the Hunter valley weighed also. The DAX had a messy day but barely moved up 0.03% on the day. The CAC fell 0.14% while in Madrid and Milan stocks rose 0.57% and 0.31% respectively.

Locally on the ASX futures market overnight the SPI 200 June contract fell 4 points to 5337 bid.

On FX markets the big change has been a recognition – finally many traders say – that the Fed and ECB are on divergent paths so the Euro has pulled back to 1.3740. The result is that the Euro is finally heading down as the market wakes up to the divergent economic and interest rate prospects of Europe,the US and other jurisdictions like Australia.

Euro looks like it is going to test trendline support at at 1.3550ish now that it has taken out recent range lows.

Sterling’s recovery continued helped by the data and it is back aboe 1.66 at 1.6608 while USD/JPY is largely unchanged at 102.11.

Before the BRICS and the MINTS there was the Dollar Bloc whose members are the Aussie, Kiwi and Canadian dollars.

Overnight we saw some solid gains in these three currencies with the CAD the stand out gaining 0.65% against the USD to 1.1027 while the Kiwi rallied the best part of 100 points to 0.8671 and the Aussie was a bit of a laggard all things considered up just 0.30%.

The key here – if this is a concerted move for the dollar bloc it tells us something about what traders and investors are thinking about either global growth or the need to find a safely diversified port in a potential storm for their money.

Either way it feels like they might do okay for a bit yet even if it is hard to but the Kiwi at the highest levels since the all time high in 2011.

On Commodity markets with the fog or war receding and the US and UK economies seemingly doing ok Gold fell heavily once again to $1291 this morning for its lowest close since early February and back below the 200 day moving average. Crude rally 1.13% to $101.39 Bbl. Copper rose back to $3.01 lb while on the Ags corn rose 1.44%, wheat rose 1.97% and soybeans fell 0.24%.

On the data front there is nothing out in Australia but in our time zone today we see the release of industrial and manufacturing data in Korea and consumer price data in Japan. In the UK the GDP for Q4 is out while in Europe Business consumer confidence and business climate and German CPI is out. In the US personal consumption and Uni of Michigan consumer sentiment is out.

Have a great day and good hunting

Greg

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