Morning Commentary: No Man’s Land Once Again

Foreign Exchange - Morning Commentary

No Man’s Land Once Again

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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
As we arrive this morning, respective equity, interest rate, commodity, and foreign exchange rates have become increasingly less correlated despite the upbeat news on U.S.-China trade talks and Brexit. Both bulls and bears can make strong cases for their respective causes, but the disputed land that lies between them both remains a mine field of random price action, whipsaw price reversals, and quick and sharp reversals of fortune within a broad consolidative pattern. It is not a place for the faint of heart and one needs a strong backbone and deep pockets or should move to the sidelines and wait for the dust to clear.
Asian equities were mixed, European equities are in the red, and U.S. equities were forecast to open fractionally higher but are opening lower. G7 interest rates are higher (exception of Australia) along with commodity prices; the U.S. dollar is higher for the fifth day in a row after falling in seven of the previous nine sessions. We appear to have entered a time frame where most of the good news has been priced in as investors await the conclusion of the U.S.-China trade talks and an important week of U.K. Parliamentary votes coming up on March 12, 13, and 14.
The ECB has its monetary policy meeting this Thursday and the U.S. jobs report comes out on Friday. Perhaps these two events might move the needle slightly, but it would appear we will remain in the Gulag for the time being until such time that a clearer case can be made for either a more bullish or bearish environment.
  • The Reserve Bank of Australia (RBA) kept interest rate unchanged at 1.50% as expected. The last move by the RBA was to lower interest rates from 1.75% to 1.50% on August 3, 2016. The RBA continues to reinforce a dovish message about the Aussie economy and Aussie interest rates are lower again on the session with the Aussie dollar remaining weak and vulnerable for now.
  • China lowered its official growth rate for this year to 6.0%-6.5% from “about” 6.5% last year. Weaker exports, investments and consumption are all combining to slow the economy in conjunction with rising debt levels. The Chinese economy GDP peaked in 2008 at nearly 14% GDP and has been gradually declining since then, back to the levels prior to joining the WTO in 2001. The Chinese yuan is unchanged on the session.
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