US Stocks Rally after Weaker CPI – Nasdaq up 1.15%
US stock markets rallied strongly into the weekend on Friday to hit fresh record levels after a weaker-than-expected CPI number and strong earnings reports helped drive investor sentiment higher. The Dow added 1.01% to move up to 47,207, the S&P gained 0.79% to 6,791, and the Nasdaq finished up 1.15% at 23,204. The dollar had a mixed day against the majors despite the weaker number, the DXY closing the day flat at 98.94, while Treasury yields were also unimpressed with the data, the 2-year closing down just 0.9 of a basis point at 3.480%, and the benchmark 10-year closing flat at 4.001%. Oil prices drifted lower off recent highs, Brent down 0.35% at $65.76 and WTI down 0.47% at $61.50 a barrel. Gold also fell to lock in its first down week in 10, closing the day down 0.32% at $4,113.05 an ounce.
Central Banks in Focus this Week
It is a huge week ahead for major central banks, with four big players set to announce interest rate decisions. FX traders will be paying particular attention, as any surprises or major changes in forward guidance could see long-term interest rate differential trades take a change of direction. We are expecting 25 basis point cuts from both the Bank of Canada and the Federal Reserve on Wednesday, with the Bank of Japan and the European Central Bank expected to keep rates steady on Thursday. As always, and barring any surprise moves, the devil will be in the detail, and FX players are expected to see some big moves in currencies around all events. Geopolitical updates will play a major role in all announcements from the major banks, with tariffs and trade issues front and centre for both the Fed and the Bank of Canada, while recent changes in government and the Bank of Japan’s reaction will be a huge focus for yen traders.
Quiet Trading Day to Start a Big Week
It is a quiet start to a busy calendar week today, with little scheduled to move the market. However, news out of Malaysia from both the US and China camps on trade talk progress is positive and should combine with Friday’s strong day on Wall Street to see a good start on the Asian open. New Zealand markets are closed for a bank holiday, but this is not expected to have a significant impact on liquidity. There will be a strong focus on Australian markets towards the end of the session, with Reserve Bank of Australia Governor Michele Bullock due to speak in Sydney. The London session will see German IFO Business Climate data released, with the market expecting an 88.1 print, and we should see moves in the euro around the release. There is little scheduled on the calendar in the New York session, although Canadian markets are expected to kick off on the back foot after President Trump confirmed a 10% increase in tariffs over the weekend. Traders are expecting geopolitical updates to dominate flow today, and at present, they do seem to be largely positive; however, many are aware of how swiftly that can change in current market conditions.
