Global stock markets had a tough day yesterday as global trade concerns increased after China pulled out of the next round of talks with the US and domestic political tensions in the US hit their markets with news that deputy attorney general Rod Rosenstein may be forced out of his position. The Dow and S&P finished the session well in the red with the NASDAQ just keeping its nose above the water and the Dollar Index managed to climb back from sub 94.00 levels. We saw the expected reaction across the ‘risk on’ products but the moves have not been excessive as fatigue does seem to be hitting the market on newswire reaction.
Elsewhere in the markets, the euro got a boost as ECB President Draghi predicted an increase in underlying inflation and therefore the central bank may be able to raise rates late next year. The sterling also came in better bid against the greenback and on the crosses as news on Brexit improved slightly, Angela Merkel calling for the divorce to happen ‘in friendship’ and David Davis advising that the recent downturn is just a road bump on the way to a deal.
Looking ahead to today's trading and it’s quiet on the fundamental economic data front until we hit the US Consumer Confidence Data much later in the day, however are due to hear from BOJ Governor Kuroda later in the Asian session as he presents to a Business leaders' meeting in Osaka and MPC member Vlieghe will be speaking during the London session. The markets will maintain a strong focus on sentiment and fresh news which continues to add volatility, however, as we move through the week the crucial Fed meeting will gain much more interest. We approach it with the US stock markets near all-time highs, bond yields hitting yearly highs and the dollar on the back foot near quarterly lows, all are trading at potentially vulnerable levels and any change in message or tack from the FOMC could see some hard moves.