Equity market rebounds and oil price fluctuations dominated the overnight session. The European Central Bank met overnight, signaling to the market that further easing is imminent. It is believed that recent waves of financial instability and low commodity prices have resulted in downside risks to economic growth and inflation. Oil prices are close to 50% lower than ECB’s expectations for 2016 inflation forecasts, adding to deflationary fears. The EUR/USD reacted in bearish fashion dropping 140 points (1.09202 to 1.07768) off the back of rate cut expectations in March. Despite EUR softening, commodity currencies CAD, AUD and NZD fared well, as oil rebounded from fresh new lows.
Oil remains at the forefront of trader minds. Both Brent and TWI hit fresh lows around the $27/bbl mark. Despite higher than expected Crude Oil Inventories data out of the US, markets rallied upward, returning WTI and Brent to the $30 level.
Overnight markets faced risk-on sentiment as European and US markets rallied. European markets recovered some of their 2016 losses with the DAX and FTSE up 1.9% and 1.8% respectively. Despite US job claim figures rising from 283k to 293k, equity markets followed Europe upwards as the DJIA and S&P500 rallied 1.6% and 1.2%. Despite these temporary equity market recoveries, it is still unknown whether the downside of this global market correction has been found.
Trading quote of the day: Once we realize that imperfect understanding is the human condition there is no shame in being wrong, only in failing to correct our mistakes. George Soros
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