Markets are steady ahead of tomorrows NFP and as FOMC members are divided

By | July 7, 2016

Last night’s FOMC was not a market mover as some expected. The main message was the FED will have to wait and see for even longer in order to decide when to raise interest rates. Despite economic conditions becoming better, Brexit fears and implications on global economy are posing a risk towards the US economic recovery. Focus has now shifted to state of Italian Banks as Bank Monte Paschi, the world’s oldest bank, is in negotiations with the Italian government for a bailout after the EU ordered it to write of over 10 billion Euros from its books as bad debts. This latest development has brought back fresh fears over an EU crisis and possible contagion effects to other institutions. 

Currencies: JPY continues to be the strongest currency versus the USD with the latest having a mixed picture overnight. Improvement in the US ISM non-manufacturing data to 56.5 from 52.9 helped the USD get stronger, however the strength was evaporated towards the end of the US trading session as major stock indices ticked higher dragging along oil with them. GBPUSD recovered from yesterday’s low of 1.2800 and is trading at the moment just below 1.3000 with risks to the downside far from over. Down under, in Australia, the AUDUSD dropped initially after rating agency S&P downgraded the Country’s sovereign debt, however the pair managed to recover over 0.75 once again, possibly helped by Metals (Gold & Iron Ore) demand.

Stocks: Overnight, US stocks closed positive. DJIA ended overnight up 78.0 pts, or 0.44%, at 17918.62. S&P 500 rose 11.18 pts, or 0.54%, to close at 2099.73. Asian markets are mixed with Nikkei trading down -0.34% while HK HSI is up 0.74%. FTSE lost -1.25% yesterday but it might follow overall market sentiments and regain some ground. Today’s performance will largely depend on the jobs data (ADP employment) which comes a day before NFP.

Oil and Gold: Oil Rebounded. WTI defended lower side of recent range at around $46 and is back at $47.6 for the moment. Traders said that a report of a reduction in available U.S. crude oil stockpiles had been the main overnight price driver.  Gold remains strong at $1370 with healthy upside momentum. The yellow metal rose almost 9% in June, its biggest monthly increase since February. Prices are up nearly 27% so far this year, completing one of its strongest first halves on record.

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