Yesterday proved an active day in the markets, with the Federal Reserve rate cut implications and a hawkish sentiment around the lack of necessity to follow cutting in the near future. The December decision is priced at only a 20% chance of a further cut, and could very well diminish throughout the coming weeks.
The punchiness rested on a strong assumption of easing trade war concerns, which is far from the reality now.
The US/China trade discussions have re-submerged under the waters of doubt, driving the haven assets to the forefront. The Yen has benefited from its biggest move since August hand in hand with its bond market.
This, coupled with Trump’s presidency under pressure since the impeachment enquiry looks set to proceed, has pulled the USD down.
EURUSD enjoyed a brief spark up with 1.12 in sights, but yet to cross this at spot rate.
Today’s non-farm payroll unemployment figures will, as usua,l be under close scrutiny with an anticipated sub-100k figure.
In the Eurozone, the ECB kick starts its bond buying programme today, with Christine Lagarde taking her first day on the seat as President. The markets duly anticipate how her tenor over the next eight years will differ, coming from a less Economic background, but with what seems like a more diplomatic approach.
In the Emerging Markets, the South African Rand has taken a hit, with large volatility on the horizon, as Moody’s, the credit rating agency, are set to review the credit rating. With an expected downgrade to junk status following suit of the other two major agencies, a flight of Foreign Investment is a hovering concern as the causal effect of losing its place in the FTSE World Government Bond Index would spark a huge outflow, with Bloomberg commenting on an expected $15billion worth.
Have a great weekend.
Ross Hammond, Senior Corporate Account Manager