Daily Stocks Update: Risk Appetite Returns on Russia-OPEC Meeting Hopes

Daily Stocks Update: Risk Appetite Returns on Russia-OPEC Meeting Hopes

The euro and the British pound were mostly weaker against their forex rivals yesterday, as talks of additional easing stemmed from ECB Governor Mario Draghi and BOE MPC member Ian McCafferty. EURUSD slipped to the 1.1150 area, GBPUSD broke lower to 1.4450, and EURGBP is holding steady around .7700.

According to ECB head Draghi, their QE program has been working but policymakers will have to reassess their current stimulus package in their next meeting. He said that their decision to maintain or expand the QE plan would hinge on how falling commodity prices are likely to affect domestic inflation and the risks from the global financial turmoil.

Meanwhile, formerly hawkish BOE member Ian McCafferty has admitted that negative interest rates could be a policy tool used by the UK central bank. He said that, while the economy is likely to be stable, the timing of a rate hike would be much later than previously anticipated. UK CPI readings are up for release today, with the headline figure expected to rise from 0.2% to 0.3% and the core version projected to dip from 1.4% to 1.3%.

JPY loses further ground on risk appetite, weak data

Yen pairs rallied across the forex charts, as traders closed out their short positions from the previous week. In addition, speculations of currency intervention from the Bank of Japan are keeping safe-haven flows in check while the return of Chinese traders also spurred an influx of risk-taking.

Data from the Japanese economy has been weaker than expected, as the economy reportedly contracted by 0.4% in Q4 2015. The industrial production report suffered a downgrade from -1.4% to -1.7% while tertiary industry activity fell 0.6% instead of showing the estimated 0.1% uptick.

Commodity currencies advance on OPEC deal hopes

Risk appetite was also supported by stronger crude oil prices, as investors are hopeful that Russia and some OPEC member nations can come up with a proposal to trim production levels. Russia is set to meet with the leaders of Saudi Arabia, Venezuela, and Qatar today and any signs of progress could allow the comdoll rallies to be sustained.

USDCAD is edging lower to1.3765, CADJPY popped up to 83.45, AUDUSD is up to .7167, AUDJPY is up to 82.18, NZDUSD is testing support at .6600 and NZDJPY is breaking below 76.00. Earlier today, New Zealand reported a sharp decline in quarterly inflation expectations from 1.9% to 1.6%. The Global Dairy Trade auction is scheduled for the next Asian session and another decline in prices could mean more Kiwi weakness.

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.