Once again the economic calendar has been rather bare in North American trade as developments from Asia and Europe are having more influence on markets this morning. The overnight session saw the AUD and GBP strengthen on encouraging Consumer Confidence and Employment respectively while the EUR has been having a harder time finding a reason to rally. The maintenance program from the European Central Bank went in to effect today and negative rates are a new reality for banks in that region which may be keeping a cap on it. One currency pair where it is having a noticeable effect is in the EUR/JPY which is now below some previous levels of support and may find it challenging to rally from here.
Outside of the currency trading world, equities are mostly down as well the world over. Some of the blame is being squarely placed on the World Bank revising its global growth outlook for the first half of 2014. They had previously forecasted a 3.2% increase in the world’s economy back in January, but factors in Ukraine along with Frozenomics in the US swayed them to revise it down to 2.8%. Considering the incredible run experienced in equities recently, perhaps investors are looking for any reason whatsoever to take a little profit. Since many economists are predicting that the second half of the year will be much stronger than the first, this dip could prove to be only temporary.
The rest of the North American day doesn’t appear to be much more exciting than the first with only a 10 Year Bond Auction scheduled. The recent uptick in yields in the US has some pundits excited that the world could be filing their cash out of the safety conscious instrument, and a return to the risk on/risk off dynamic of yore could be returning.
Soon after the close today, the Reserve Bank of New Zealand is scheduled to make a decision on whether they will continue hiking interest rates. The overwhelming consensus at this point is that they will put their heads down and move forward, but there are whispers out there that the combination of a rising NZD/USD and falling milk powder prices could give the RBNZ pause. If they decide to pull on the reins of tightening, support near 0.85 in the NZD/USD could be an early casualty.
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