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Let The Good Times Roll

by Sean Coakley | July 20, 2016

With earning and economic data out of the United States coming in better than expected the bulls have been let out of the pen. As of yet the US dollar is trading at the highest level seen in four months against its peers as Wall Street is set to push towards new highs prior to the opening bell in New York.

The latest round of cheer occurs against the backdrop of a mixed Asian session with equities in Hong Kong and Australia putting in gains while Pokemon related fatigue in Japan put the brakes on the Nikkei’s rise as declines in Nintendo pulled the whole index lower. On the economic front there isn’t much data to report out of Asia, with asset prices largely being driven by sentiment rather than hard facts, both the Aussie and kiwi dollars have been squeezed by diminished commodity prices while the yen trades higher despite diminished fear in the markets.

European traders have proven more resolute in their optimism than their Asian counterparts with equities on solid footing across the board and bond yields moving off their historic lows. Better than expected jobs and earnings data out of the UK has seen the sterling move higher while the euro has taken a bit of a bump despite better than expected trade balance figures for the continent.

Ahead of the opening bell in North America, increased optimism in the oil and gas sector along with sustained higher prices in crude have had little impact on flight path of the loonie. The loonie has yet to take off despite these tailwinds largely due to the better than expected performance of its southern neighbour. As shifting sentiment towards the possibility of further rate rises from the Federal Reserve has sustained a rally in the US dollar which has diminished the relative performance of the Canadian currency. With that said, next week’s FOMC statement will give us a little bit more clarity on the Fed’s thinking post-Brexit, meaning that this rally, like all those before it, is subject to change.

 

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