After a relatively calm start to the week, volatility has returned to the market. Most action is seen in Stock markets, with the global selloff sparking concerns. Yesterday was the 5th consecutive day of decline s in stock markets and the SP500 has touched a 2-month low.
Currencies: USD/JPY rallied to 103.20, despite a collapse in stock markets, as the BoJ reported that it is considering cutting rates further. The rally yesterday pushed the USD/JPY to almost 200 pips higher compared to yesterday’s low. The Euro continues trading in a range of 1.1210 to 1.1250. GBP however has been a big market mover as the Pound dropped almost 170 pips from its highs yesterday following news that UK inflation was lower than what analysts expected. A lower inflation number diminishes chances of higher interest rates in the future, which normally make a currency more valuable. AUD/USD rose from 0.7440 to a high of 0.7490, while NZD/USD rallied from 0.7230 to 0.7270.
Stocks: As mentioned above yesterday was the 5th straight day of declines in stocks which are trading at 2 months’ lows. Even more worrying is the fact that the Volatility Index, often used as a measure of fear in the market has jumped to about 20%, indicating that investors are increasing best that stocks could suffer a near term shock. Since mid-July, this index has been hovering to around 12.
Oil and Gold: Oil prices slumped 3% amid projections from the International Energy Agency that said slowdown in global oil demand growth has accelerated in the 3rd quarter this year, but also due to the stock markets selloff. Gold suffered another day of losses with the yellow metal reaching as low as $1313. Noteworthy is that gold has almost lost all its gains ever since last week’s NFP which saw the yellow metal climb from $1304 to above $1350 before trading at these levels now.
Tomorrows highlights include the BoE Rate Decision, as well as US Retail Sales. Both will ensure a lot of price action in the market.