US stock market had its first loss of the week as technology companies and consumer products went south.
Overall earnings were quite bullish for markets, but there is the usual post earnings pessimism permeating markets that this is about as good as it's going to get.
Investors should also take note of surging oil prices and the possible inflationary impact they could have on sending the US yield curve higher, which could prove to be the market's undoing.
Oil Prices
Saudi Arabia with OPEC’s support is looking to draw a new line in the sand for oil prices and added another level of intrigue to the already bullish narrative. Now, whether this is merely noise or a valid bullish signal, I expect this debate to continue. But there is a multitude of the domestic reason for Saudi to chase this dream beyond Aramco's IPO.
Back in the real world, traders are still reveling in Wednesday's EIA inventories data which were conclusively a bullish signal. While the market is trading off overnight highs, it’s more likely a case of traders trimming positions ahead of potential weekend headline risk.
The civil war in Syria and threat of Yemeni rebels targeting the region’s top oil exporter Saudi Arabia with rockets has traders paying the geopolitical risk premium which should keep downticks in check. And all the while oil investors are playing the waiting game for probable oil sanctions against Iran.
All this makes for a compelling list of bullish narratives.
Gold Prices
The uncertainty over geopolitical risk and trade war tension has moved to the back burner this week and has made for a less compelling argument in the gold market. Traders are rehashing old topics amidst reasons to stay long into the weekend, but drawing few if any conclusions.
Unless unexpected headlines hit the markets, we’re likely to remain within tight trading ranges but perhaps gravitate to the lower end of the spectrum as traders pair back long positions ahead of the weekend.
The Euro
It's been a quiet 24 hours for EUR/USD, as the EUR/USD seems exceptionally fluid on a 1.24 handle but is lacking in momentum in either direction.
The Japanese Yen
Trump and Abe have come across as long-lost fraternal bothers and the markets, especially the Nikkei took notice. But despite the abundance of reason to go long USD/JPY, the market remains exceptionally defensive knowing that one headline can upset the apple cart.
The British Pound
Flip flop tick tock. BOE Carney walked back all the hawkishness suggesting interest rates will go up over the next few years but gave no specific timeline which caused anyone who was banking on a May rate hike to head for the exits.
The Malaysian Ringgit
Asia continues to trade on mixed themes, but the ringgit remains exceptionally muted due to the building election risk. But with currency markets, including G-10 mired in sideways activity, it’s unlikely we will see any significant shift in the local note today.