The euro continued to outperform for much of today’s session after top ECB policymakers delivered hawkish remarks on the eurozone economy this week, leading to some chatter that the central bank may announce its intension to end EQ at the end of the year at the conclusion of next week’s policy meeting.
With much of the attention on Bitcoin becoming a potential replacement for gold (which we don’t agree with) silver has been almost forgotten. The grey precious metal has been trading inside a very narrow range with no clear directional bias for a very long time now.
The markets have extended their winning streak for the fourth session, with Europe also trading higher. The Dow has crossed over the 25,000 mark again with the S&P 500 trading above 2760 at the time of writing.
Ahead of next week’s major central bank meetings and key data releases, there have been some interesting moves in the markets with the euro/U.S. dollar currency pair in particular showing relative strength. Although the Federal Reserve is almost certain to raise interest rates next week, it is the European Central Bank which all of a sudden is looking to be the more anticipated meeting.
It has been a day of two halves for the U.S. dollar. The greenback was initially lower and sharply so against some commodity currencies, before bouncing back in the second half of today’s session – most notably against the British pound but also versus the Swiss franc and the Japanese yen. Commodity currencies were still outperforming, however, no doubt boosted by the ongoing risk-on rally.
Friday’s “risk-on” rally, triggered in part by those strong US employment figures, followed through on Monday as Asian shares and U.S. index futures rose. Although Europe was also higher at the open, some of the major indices such as the German DAX gave up their earlier gains as investors considered the impact of U.S. import tariffs on metals and how this may impact European companies and their profits.
The sentiment was already positive before the release of the US jobs report as Italian bond yields were lower for the third day due to diminished political concerns following the formation of a coalition government there. When the U.S. jobs report was published, this triggered a fresh rally in risk-sensitive assets as investors were relieved to learn the jobs market remained healthy after two months of poor showing.
This has certainly been a rollercoaster trading week for financial markets thanks to geopolitical uncertainty and renewed trade war fears. Easing political tensions in Italy have rekindled risk appetite, ultimately resulting in global equity markets venturing higher.