Posted on: 12 January 2016, by: Pepperstone Support, category: Market Review
Equities and commodities trade lower while FX positioning remains relatively light in terms of committing to specific themes. S&P’s finish up smalls on the day thanks to some dovish commentary from Lockhart, 0.09% on the session.
It’s all about China at the moment. The lack of clarity regarding the PBoC’s policy on their currency going forward seems to be driving a lot of the negative price action. We had some comments out of the Chinese central bank today and according to the Reuters report, decisive action is forthcoming to combat what looks like an ongoing trial by error policy by regulators. Named Chinese officials were a bit more diplomatic. PBoC member Ma expects two-way volatility against the US dollar to increase, but hopes the market focuses on moves against other currencies as well.
The aforementioned comments by Lockhart were timely given the rout in equities as we headed into the NY close. The key sentence was “Fed will not have a great deal more inflation data by Jan and March policy meetings to make a call on a 2nd hike”. This was interpreted as a clear sign that the Fed will not be hiking in March and thus supportive of risk.
Everyone is watching oil. We managed to drip briefly below 31.00 today in NY trade with oil down nearly 6.5% on the day and nearing levels we haven’t seen since 2003. The charts are ugly and the fundamental story remains one dominated by oversupply. Many market watchers are calling for moves into the mid to low 20’s as the US dollar continues to strengthen.