Currencies
EUR/USD – was unable to benefit from the better data out of the Eurozone and the weaker data out of the US, and remains trading near the resistance around the 1.117 level. Today is a light day if we look at the data, but not to worry as there is enough in store this week with on Friday the NFP.
USD/JPY – is moving up as the market eagerly awaits confirmation on what the Japanese government will do. The expectation is that it will announce stimulus of 28-29 trillion Yen (well over $270 billion). If he will fall short on this, we will have the second disappointment within a week and we could see a drop towards the 100 level.
GBP/USD – started to drop after the manufacturing PMI data out of the UK was worse than expected. A contraction was already taken into account, but was even larger than anticipated, bringing back the fear the effect of the Brexit vote could have a larger impact than thought. While it was already widely expected that the BOE will cut the interest rate on Thursday, with the latest data this has become almost a certainty. We have more data today and tomorrow, but it is not expected to paint a different picture.
USD/CAD – moved up steadily as oil prices went down, but is currently held back by the resistance around the 1.312 level.
AUS/USD – has just lowered the interest rate as expected. It sees a large decline in business investment and expects a continued low inflation.
Indices
S&P 500 – it is still a bit too early to really talk about a breakthrough, as the drop in oil prices has led the S&P to move lower as well, as the energy sector dropped.
Commodities
Gold – is moving down after reaching the highest level in nearly a month on the backdrop of the weakness in the USD. Nevertheless, the expectations for a rate hike by the FED are continuing to decrease after the latest weak data, even though some FED members say that they could still increase the rate faster than the market anticipates. For the markets to believe that, it would likely require a strong NFP reading on Friday.
Oil – dropped to below the $40 a barrel in trading yesterday as the apparently everlasting oversupply weighs heavily on oil. We can add to that record production levels and also a cooling economy in the US, which is likely to lead to a slowdown in demand. As mentioned earlier as well, another aspect is the large inventory levels of gasoline, which likely will cause refineries to close down earlier than usual for maintenance, leading to a further drop in demand.
Stocks
UniCredito – dropped sharply as the Italian banking sector is under pressure and the bank was mentioned in the ECB stress test over the weekend.
Tesla (NASDAQ:TSLA) – has agreed to take over SolarCity as reported a few weeks ago, but does so at a lower price than initially announced. The deal is now pending approval of the shareholders. Tesla will be releasing its earnings tomorrow.