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Traders Navigate Calmer Water

Investor sentiment has taken a clear turn for the better. With trade war fears easing and tensions with Russia thawing, traders on Wall Street were left free to focus on strong results from big corporates. More expectation beating results pushed the Dow to close sharply higher at 24,786, whilst the S&P gained 1.1% and the Nasdaq closed 1.7% higher helped along by a 9% lift in Netflix.

 

The calmer sentiment in the market as investor concerns fade over military action in Syria and a potential US – Sino trade war, is being played out in the CBOE Volatility Index (VIX) also known as the fear gauge. The VIX which dropped over 8.5% in the previous session is trading below 15 for the first time since mid-March. This points to a calmer picture on the markets after a particularly rough past few months.

 

With geopolitical tensions easing, at least for the time being, US earning season has filled the void, impressing investors, even though the bar has been set high. Netflix jumped just shy of 10% after as investors continued to react to better than forecast subscriber numbers, meanwhile UnitedHealth Group was also up 4% after results surprised to the upside.

 

Will UK CPI push pound higher?

The pound dropped below $1.43 again overnight as investors continued to digest the wages data. Wage growth in March at 2.8% met expectations for pound traders and was also above inflation for the same month. Markets will now look ahead to U.K. CPI data this morning for reassurance that inflation remains on the right track towards the central banks 2% target and there are no signs of it pushing back towards the elevated level of 3% where is stagnated at the end of last year.

 

GBP/USD dropped from a post Brexit high of $1.4377 to $1.4283. Signs of inflation continuing to ease could lift sterling once again to fresh post Brexit highs, as optimism will grow over the health of the UK economy, boosting prospects of a Spring interest rate rise.

 

Eurozone Inflation Data In Focus

EUR/USD remained depressed in the previous session on weak German sentiment data and a buoyant dollar. The German ZEW sentiment indicator continued to freefall in April in response to concerns over a trade war impacting on German exports. Today’s inflation data from the eurozone could show signs of a pickup having been lacklustre for the past year. Whilst CPI is forecast to be 1.4% on an annualised basis, on a monthly basis an uptick to 1% from 0.2% is forecast. Should this be the case the EUR/USD could look to rebound back across $1.24 in early trade.

 

 

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