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USD Dominates

The cumulative effect of a series of weaker data reads in the United States forced a market re-think on interest rates, and brought the USD to its knees overnight.
By · 4 Feb 2016
By ·
4 Feb 2016
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The cumulative effect of a series of weaker data reads in the United States forced a market re-think on interest rates, and brought the USD to its knees overnight. The 2% currency slump resonated across asset classes, boosting commodity prices and shares. Good company reports and renewed fear on banks took a back seat to the dollar driver.

During the European session general fear saw bank selling due to the sector’s economic leverage. This inchoate investment theme suggests markets are still running on sentiment rather than hard numbers – a side-effect of increasing volatility. Oil markets surged, and West Texas crude finished the session up a whopping 9%, despite another 7.8 million barrel build in inventories. Traders are expecting a spectacular reaction in Australian energy shares today.

Futures markets are pointing to a modest 0.5% opening gain for the Australia 200 Index. Mining stocks should see support, given the dollar inspired lift in precious and industrial metals overnight. The swing factor in trading will be financial stocks. If the overall lift sparks bank buying, the day may finish stronger than current indications.

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Michael McCarthy
Michael McCarthy
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