Market Summary
Asian markets were mostly lower on Thursday as investors readjusted on the latest Fed monetary policy and the likelihood of another interest rate hike this year. Australian markets faced heavy selling pressure as commodity prices fell in response to USD strength. Japan’s Nikkei was modestly higher as the Bank of Japan stood firm on monetary policy. The Nikkei now sits just 2% below a 21-year high.
European markets rose Thursday, led by gains from the banking sector as the Federal Reserve monetary policy statement indicated the U.S. is ready to raise interest rates once more in 2017. With the Fed meeting now out of the way, the next big event is the German Federal Elections, slated for this Sunday. Current German chancellor Angela Merkel is widely expected to win and serve her fourth term, with current odds near strongly towards her victory. One thing that isn’t certain is whom Merkel will choose as her coalition partner, and while this could have long-term implications for Germany, the EU, and the Euro, markets will likely have little response in the short-term. One wild-card would be for a coalition with the Free Democratic Party, which would be pro-business and could spark a rally in the financial sector.
U.S. markets opened flat, but by noon had turned lower as investors fretted over the possibility of another interest rate hike in December. The Dow snapped a nine session winning streak and all three of the major indices coming off record levels. The worst losses were seen from the technology sector, which has been struggling of late, and from the consumer staples sector.
Today’s Assets
EUR/USD
Euro-Dollar rebounded on Thursday, trading back above 1.1900 as the USD weakened against rival currencies. Friday could see some position taking in EUR/USD, as traders will be looking ahead to the German Federal Elections. Although the outcome is virtually guaranteed, it is also likely to be some caution over the Euro considering the importance of the event.
USD/CAD
After rising for four consecutive sessions, the Loonie took a breather on Thursday in response to caution from traders ahead of the economic data on Friday. It was notable that USD/CAD didn’t move lower by more than it did however, which could mean there can be a strong move on Friday depending on the results of the reports.