Overnight
A quiet night on the stocks front overnight, with European and US markets relatively quiet. The biggest mover being the FTSE with a 0.58% move. Overnight marks the S&Ps 37th straight day without a 1% trading range. As always these sideways moves draw headlines of impending volatility, having lured traders into tight ranges, a blow out in either direction is building in expectation. In the meantime, ensure you continue to exercise strict placement of stop losses (EasyMarkets offers free Guaranteed Stop Losses) and you trade with momentum in the case of any volatile directional moves. The Volatility Index (VIX) chart below shows 12 months of a downward trend in volatility, with the occasional 2-3-week spike in activity.
Gold continued to edge higher, touching 1,246.60 in overnight trade. Crude oil inventories of 13.8M was a huge jump in expected supply. The market shrugged off yet another strong supply number and the commodity rallied.
Tight ranges in major FX pairs overnight with a lack of economic news or major headlines driving any serious moves. GBP/USD consolidated the move from Tuesday nights comments from Bank of England Monetary Policy Maker Kristen Forbes – the pair currently trading at 1.2537.
RBNZ
This morning the RBNZ left rates on hold at 1.75% also indicating its intention to leave rates on hold until June 2019. Gov Wheeler also expressed concerns about a high exchange rate.
The AUD/NZD traded as low as 1.0445 on the announcement before it rallied and encountered recent resistance at 1.0530 (7:30AM AEST). As the market was placed for 1-2 rate hikes in the coming year expect to see continued strength in this pair as the NZD unwinds its consensus trade. With long term inflation expectations anchored around the 2%, the exchange rate was a key focus in the comments. “The exchange rate remains higher than is sustainable for balanced growth and, together with low global inflation, continues to generate negative inflation in the tradables sector. A decline in the exchange rate is needed.”
Remaining market activity this week
Governor Lowe will speak at an evening Economic Forum dinner on Thursday (8:00PM AEST), with the Monetary Policy Statement released the following morning (11:30AM AEST).
Fri Feb 10th:
China Trade Balance. EXP 295B
GBP Manufacturing Production m/m. EXP 0.3%
