Risk was put back on across the board yesterday as stock markets and currencies rallied on optimism that China will be able to stabalise financial markets. The weaker than expected trade balance figures have been overlooked as US stocks rallied to their largest one day gain in 2 weeks. The Us took their cue from Asia where the Shanghai composite rose 1.9%. Most analysts had been expected further falls in Asian stock markets and when this didn't happen it was a huge relief. This helped the Australian and the New Zealand dollar to make large gains although it remains to be seen if this is a reversal or simply a correction at this stage.
This morning brings manufacturing data from the Uk which is likely to contract for the again , perhaps reversing the growth seen in June. Sterling has benefitted due to a short squeeze ahead of tomorrow's MPC meeting and the Pound is very sensitive to UK data releases. Monetary policy is driving the market at the moment and weaker data pointing to a delayed rise in interest rates will see the Pound fall from its recent highs.
There is little data due this afternoon however the Bank of Canada do meet and there is a risk that interest rates may be cut by another 25 basis points. Canada is now technically in recession after 2 quarters of negative growth. Most expect the BOC to leave rates on hold. It would be a big surprise and therefore the move could be exaggerated if they do make a move so speak to your Halo Financial Consultant to discuss the placing of limit orders to take advantage of the potential volatility.
This evening we also get a decision from the Reserve Bank of New Zealand. Most are expecting a cut of 25 basis points which take the official cash rate to 2.75%. the accompanying statement will be closely watched as markets scrutinise the RBNZ's view on inflation. If they think that inflation is likely to rise throughout the year then further cuts may be deemed unnecessary. There is likely to be volatility around the announcement later this evening so well placed automated orders at higher levels could be struck.