Morning Commentary: Seat Belts Will Be Required

Foreign Exchange - Morning Commentary

Seat Belts Will Be Required

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Alan Rose
Alan Rose
Foreign Exchange Head Trader
We seem to be entering a new and different phase of intraday and interday volatility in the markets. U.S. exceptionalism regarding growth and rising interest rates has been a steady and dominant theme in the markets over the past year and beyond.  However, market pundits and commentators are becoming increasingly concerned about a potential end game to that scenario of continually rising equity prices and interest rates.
A steady and methodical rise in interest rates, beginning in 2015, has done little to derail the economy or U.S. equities fueled further by tax cuts and deregulation under President Trump. Over the past month, rates have been rising sharply and has dented equity optimism as interest rates approach 10-year highs. This combined with softening in housing, automobile sales, and a mini-tech meltdown are raising questions about U.S. equity performance that could impact Fed interest rate policy if equities should melt down and ripple through all asset classes.
Overlaid of top of our domestic issues are an international and geopolitical array of issues that remain unresolved and will continue to hang over the market with uncertain outcomes. These issues include Chinese trade war tensions, Brexit, Iran, Turkey, Germany’s coalition government, elevated oil prices and now Saudi Arabia. The outcome of the U.S. midterm elections are also just around the corner. All of this means that markets will remain increasingly emotional and anxious for investors and traders. Buckle Up!
  • U.S. Retail Sales for September were disappointing as they rose by only 0.1% against expectations of a rise of 0.6%. Retail sales ex-auto also disappointed at -0.1% against expectations of a rise of 0.4%. U.S. interest rates are fractionally lower on the news and the U.S. dollar is weaker today after testing higher overnight.
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