Fed knocks US dollar for Six but market ignores Euro dovishness | Vantage FX

Use the Force Luke is the Star Wars version of the investment entreaty that “The trend is your friend” and studies have shown a persistence of trends in the face of contrary evidence many times.

Such was the case overnight with both ECB governing council member, Bonnici and Spanish PM Rajoy saying the Euro is too high. But their comments were trumped by the very dovish tone in the Fed minutes that were released overnight and which were covered by my colleague Matthew Boesler at Business Insider in the US.

The impact is that the Fed’s signals ignited a big US dollar sell off with Euro now 1.5 cents higher than a couple of days back at 1.3851.

1.3950 on the cards?

Two things seem to be occupying traders minds. First, they have not been averse to using a weaker US dollar to fire the economy and second they show that they are still very worried about the economy so trader take both those and ran with it. The Pound is up at 1.6788 while the Aussie was buoyed by solid data and a weak USD and is at 0.9380 this morning. USDJPY stabilised and sits at 101.96.

GBP Close to a massive break

Turning to stocks and it was a solid rally on the back of the minutes and at the close the Dow had gained 1.11% or 181 points to 16,437. The Nasdaq was 1.73% to 4,184 and the S&P 500 rose 20 points to 1,872.

Locally ASX 200 is set to open higher again today with the June SPI 200 Futures on the ASX leaping 42 points in overnight trade.

In Europe stocks also rallied although less so than the US with the FTSE up 0.69% to 6,636, the DAX rose 0.16% to 9,506, while the CAC was 0.41% higher at 4,443. In Milan and Madrid stocks were up 0.23% and 0.04% respectively.

On Commodity markets US dollar weakness also had an impact. Crude rallied to $103.45 Bbl, Gold is at $1310 oz and Copper $3.07 lb. On the Ags corn fell 0.94%, wheat dropped 1.74% and soybeans rose 0.86%.

On the local data front arguably Australia’s most watched data point will be released at 11.30am this morning with the ABS announcing the employment change and unemployment rate in March. The market is looking for a rise of 5,000 jobs but Westpac is on the record saying they think a fall of 20,000 is coming. In China trade is very important and then French CPI tonight will help guide ECB interest rate expectations. The BoE is out as well with their decision on rates before initial jobless claims in the US.

Have a great day and good hunting.


NB: Please note all references to rates above are approximate

To learn more about Greg McKenna, read on here.