The ECB cut their interest their interest rate by 25bp to 3.5% as expected, although failed to commit to further easing. Lagarde said in her press conference that, whilst their path for rates is clearly lower, its pace and size is not predetermined. As the ECB remain in a data-dependent approach, it likely lowers the odds of an October cut given recent data.
This promoted short-covering on the euro to sent EUR/USD markedly higher from 1.10. USD bear also returned, even though US producer prices rose slightly more than expected. The USD index formed a bearish engulfing day and fell back to 101, marking a potential double top at 101.50 and sealing its place as the day’s weakest FX major. NZD/USD and AUD/USD were the strongest with an 0.8% gain, with GBP/USD in third place up 0.6%.
Wall Street rose for a fourth day on bets the Fed will only hike by 75bp this year, not the 100bp markets were trying to price in. Both CPI and PPI delivered upside surprises in his week’s report which lowers the odds of a 50bp cut in November.
SPI 200 futures (ASX 200) were on the cusp of reaching a record high overnight, which points to a gap higher for the ASX 200 cash market today.
Gold broke to a record high thanks to a weaker US dollar, and WTI crude oil rose for a second day from arguably oversold levels.
Trump has confirmed he will not participate in another debate with Kamala Harris. Despite his claims that it was his best debate, polls, the market reaction and even some Republicans disagree, noting that he failed to stay on message.
Events in focus (AEDT):
- 08:30 – NZ business PMI
- 12:30 – SG unemployment rate
- 14:30 – JP capacity utilisation, industrial production
- 16:45 – FR CPI
- 18:30 – UK inflation expectations
- 19:00 – Industrial production
- 21:00 – CN loan growth, social financing, money supply
- 00:00 – US consumer sentiment (University of Michigan)
Gold technical analysis:
Gold has been stuck in a well-supported range for three weeks, with dips being bought yet rallies ultimately failing. But that was not the case on Thursday which saw gold prices break convincingly to a record high, with a solid daily close above the August high. The breakout was accompanied with heavy volume and a high delate (more bids than asks), and it could now resume its bullish trend given the strength of the underlying trend overall.
However, APAC traders may want to warrant caution chasing gold higher with resistance looming around 2600. The monthly
ASX 200 futures (SPI 200) technical analysis:
We saw a solid performance on the ASX 200 cash market yesterday, in line with yesterday’s bullish bias. And it should gap up nicely today given the rally on SPI 200 futures overnight. In fact the futures market was just a cast-whisker away from reaching its own record high, a level which seems very likely to be tested today.
Regular readers will know I am always dubious of market prices around record highs. Especially when it flirts with them at a market close without committing. This could make for a messy open and some chop around the July high before the real move begins. Therefore I would prefer to be an observer and see how the market plays out, and seek dips at lower levels should support be established at a favourable level. Even if prices rally at the open, I’d prefer not to chase the move.
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-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
