IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

Risk sentiment remained resilient through European and US trade in an active night on the macroeconomic front. Equities extended their gains yet again and with investors continuing to believe in the ability of central banks to support markets. There was also another set of encouraging US economic data with unemployment claims coming in well ahead of expectations (340,000 versus 354,000 anticipated). The more interesting moves were in the forex space as market participants reacted to different policy announcements. Just having a look at some of the major forex pairs, EUR/USD rallied, while AUD/USD and GBP/USD were sidelined. The US dollar got a kicker from the impressive unemployment claims and we continue to see investors repricing the greenback as they try to anticipate when the Fed will pull the pin on QE.

Of course the big story of the night was Mario Draghi’s comments and the effect they had on the single currency. EUR/USD spiked to a high of $1.31164 as it reacted aggressively to Mario Draghi’s statement that the risks to inflation remain finely balanced. Elsewhere, having printed a fresh higher high of 95.09, taking out the previous high of ¥94.77 there is renewed vigour to push USD/JPY further north, and perhaps the upcoming US payrolls report could continue the momentum. The consensus is for 165,000 jobs to be created (range of 260,000 to 121,000), which is still a descent number. However, we suspect given the good ADP private payrolls and the strong employment sub-component of the services ISM that the market is positioned for a strong number. As a result, the USD is in for another big session later today. With USD/JPY at these elevated levels, we expect a strong start for Japan’s Nikkei.

Ahead of the open we are calling the Aussie market up 0.4% at 5131. For the week so far the local market is 0.5% firmer and this could easily change today with plenty of key data due out around the region. This will put the local currency in focus today. Technically the AUD/USD looks set to close above the downtrend drawn from the January 23 high and all eyes now focus on 1.03 (the 38.2% retracement of the January 11 to March 4 sell-off). Keep an eye on China’s January trade balance at 13:00 (AEDT), where analysts are expecting imports to step off a cliff. The $29.15 billion surplus seen in January is expected to swing to a $6.9 billion deficit, with imports likely to fall 8.5%. Exports at the same time are expected to gain just over 8%. Just looking at the resource space, we expect a firmer start for BHP Billiton with its ADRs pointing to a 0.4% rise to $35.96. Iron ore names might also be helped by the fact that iron ore prices firmed 0.3% to 146.3. Although most commodities gained ground, gold continued to lag particularly with the USD firming on strong data. As a result, we could see gold names struggle today. Goodman Group will be one to watch after buying a $450 million interest in a Hong Kong logistics facility. Some of the big banks retreated from record highs yesterday. However, we expect them to participate in today’s gains after their peers led US markets overnight.

Market Price at 8:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 1.0272 0.0022 0.21%
ASX (cash) 5131 23 0.46%
US DOW (cash) 14332 50 0.35%
US S&P (cash) 1548.3 6.0 0.39%
UK FTSE (cash) 6450 12 0.18%
German DAX (cash) 7944 18 0.22%
Japan 225 (cash) 12128 154 1.29%
Rio Tinto Plc (London) 34.51 0.82 2.43%
BHP Billiton Plc (London) 20.93 0.16 0.76%
BHP Billiton Ltd. ADR (US) (AUD) 35.96 0.14 0.38%
US Light Crude Oil (April) 91.56 1.33 1.47%
Gold (spot) 1577.58 -6.3 -0.40%
Aluminium (London) 1982 21 1.06%
Copper (London) 7752 37 0.48%
Nickel (London) 16598 -1 0.00%
Zinc (London) 2213 31 1.40%
Iron Ore 146.3 0.5 0.34%

IG Markets provides round-the-clock CFD trading on currencies, indices and commodities. The levels quoted in this email are the latest tradeable price for each market. The net change for each market is referenced from the corresponding tradeable level at yesterday’s close of the ASX. These levels are specifically tailored for the Australian trader and take into account the 24hr nature of global markets.

Please contact IG Markets if you require market commentary or the latest dealing price.

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