It’s been a busy week for trading already and the action looks set to continue right into the weekend. In addition to normal month end squaring of positions, there have been a number of major developments overnight with more expected this morning which could potentially rock the markets.
Asia Pacific stock markets soared led by a 3.8% gain in the Nikkei while JPY was broadly crushed overnight after the Bank of Japan surprised the street by taking decisive stimulus steps, cutting its benchmark interest rate into negative territory. The central bank pushed off its timetable for reaching 2.0% inflation to the first half of 2017. Governor Kuroda also indicated that QQE and negative interest rates are expected to continue indefinitely until stable 2.0% core inflation is achieved. China markets also rebounded as the PBOC continues to put money into the system ahead of next weekend’s Lunar New Year holiday.
Positive momentum has continued into Europe and North America stock action this morning with the FTSE up 0.8% and the DAX up 0.4% while Dow and S&P futures are up 0.7% so far. We could see more trading activity this morning around the US GDP and Chicago PMI reports, which will give traders a better idea of how the US economy fared in Q4 and then in January. Traders may look to these numbers for any reason to change expectations of another Fed rate hike in March, so both stocks and USD forex pairs could be active on the news.
We also could see a lot of action in individual stocks today in reaction to another big round of earnings reports that came out overnight. Amazon (O:AMZN) missed badly on sales and earnings putting its shares in the hot seat. On the other hand, Microsoft (O:MSFT) and Amgen (O:AMGN) beat expectations, while Xerox (N:XRX) beat the street, raised its dividend and announced plans to split into two companies.
Crude oil has been holding steady overnight as it digests yesterday’s big breakout rally. Gold is also down slightly which appears to be related to moderate gains in USD on the back of the JPY plunge.
CAD continues to digest recent gains against USD and had a big rally against JPY along with other major currencies. The loonie could be active as well this morning around the Canadian GDP and producer prices reports which may indicate how Canada’s transition toward a more balanced economy is progressing and how much pressure the Bank of Canada could be under to cut interest rates again.