Posted on: 21 January 2016, by: Pepperstone Support, category: Market Review
Market turmoil continued Wednesday:
EM bore the brunt of the bear. Broad pain across EM FX, while G10 FX largely consolidated. All-time highs for USDRUB (82.4538) and USDMXN (18.6762). Despite this, Russia CB Governor Nabiullina says the bank will not intervene in RUB unless financial stability is threatened. Meanwhile, Banxico, threw USD400mn in intervention at USDMXN. Intervention didn’t help the pair ease back towards 18.50 - broader sentiment improved into the NY close just as fast as it deteriorated after the NY open.
New lows in oil. New cycle lows for WTI near 26.20 and Brent, 27.10. Some relief into the close, leaving WTI just above 28.0.
Bear markets broadly tracking oil. UK FTSE entered a bear market, down nearly 5.0%. Major US equity markets saw declines close to 4.0% but recovered some ground into the close (SPX, -1.17 & Dow, -1.56%). Nikkei futures now point to losses in excess of 3.8% for Thursday’s Asian Open.
US fixed income at key levels. US 10y yields continued to fall but remain well above over August and October lows near 1.90%. Now 1.9820%.
No vacation in Davos. Global policy makers talked on the sidelines of the Davos forum. Top concerns: China, growth, oil and Donald Trump.
Getting defensive - Saudi ordered banks to limit traders’ ability to be against the SAR, reported Bloomberg. The CB declined to comment on reports.
The Bank of Canada decided to ignore the global rout. It has held rates on the hopes that fiscal stimulus might save the economy. Governor Poloz did confirm that the meeting began with a debate on easing. USDCAD fell roughly 150pips to sub-1.4500 in knee-jerk reaction to the decision and corrected back on dip demand. However, it settles in NY at fresh lows near 1.4465/80 following the oil and equity market recovery into the NY close. From a policy perspective, the market seems to conclude that while easing may not have been delivered in January, it will likely have to come within the first half of the year.
Ahead of the ECB meeting Thursday, EUSUD now trades 1.0890. Market News International reported that the meeting is unlikely to have a "serious policy debate." The debate "can only come in March," says MNI's unnamed sources. This source claims that policymakers won’t be inclined to signal big shifts in absence of new staff projections.
USDJPY tenuously held well above the neckline of the massive head and shoulders pattern that’s developed since late 2014. 115.85 is the line in the sand with a litany of lows between 115.85 and 116.15.