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Daily Market Analysis
More Bounce To The Ounce

Sean Coakley February 8, 2017

– Greenback Marches Higher

– Positive Sentiment Propels Equities

– Greek Concerns Resurrected

 

While it may be more accurate to describe it as long-awaited rise rather than a bounce, the fact remains that the US dollar is back on the march. Improving sentiment has the buck slowly gaining on its peers after a brutal start to the year that saw it dive across the board.  Equities have also found favour despite a slow motion return to the existential angst that once gripped Europe as Greece again teeters towards the precipice of financial oblivion while the IMF and ECB work to put together yet another credit package.

The mood in Asia was decidedly upbeat, across the region equities saw gains while the yen once again outshone the greenback. On the negative side, Chinese FX reserves continue to plummet as the PBoC attempts to maintain the value of the yuan. While the loses in the yuan have been stemmed for now, there are concerns of an increasing clamp down on capital flight out of China as over 75 billion dollars’ worth of cross-border deals have been denied by the Chinese government and FX reserves sit at the lowest level in 5 years. With China, one of their closest trading partners both the Aussie and Kiwi dollars have traded mostly flat as positivity in the commodity sector offset some of the pain emanating
from China.

With the European session well underway sentiment continues to drive equities higher in Europe despite re-emerging concerns about Greece.  On the currency front, both the pound and the euro have taken a bath relative to the greenback with the common currency also off slightly against its British counterpart.

Ahead of market open, North American equity futures suggest the same positive sentiment seen elsewhere will keep equities on the front foot stateside. Unfortunately for the Canadian dollar and Canadian producers the latest round of strength in crude oil prices has translated into production gains in the United States.  With drilling technology fundamentally altering the economics of oil production, particularly in North America, there may now be a ceiling on oil prices far below that which most oil sands producers would prefer to operate at.  Despite the Federal government’s support for pipelines this fact puts a damper on potential employment and wage gains to be seen from higher commodity prices which unfortunately is a definite knock on Canadian growth prospects.

Best of Luck,

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