The weekend has passed with a lack of any significant developments so price action will be dictated by moves in Asian equity markets and S&P futures as we start the new week. Last week’s volatility explosion has been contained to equities and bonds, and many are questioning how long it will take before it spills into other asset classes. If volatility persists, safe haven currencies likely become more volatile/correlated to equities.
The USD will be in the spotlight this week with CPI & Retail Sales due. Stronger prints would likely result in a hawkish shift in Fed expectations and a continuation of market volatility. If instead we have weaker prints, we could see a decent relief rally in stocks.
Outside of the US, the main market movers are UK CPI & Retail Sales, and Australian Employment numbers. Keep an eye on Brexit headlines as well, which completely stalled and reversed the hawkish BOE influences into the week’s close.
Going into the week I still like US equity weakness unless we start pressuring the 25000 level on the Dow. Also, I continue to be bearish on US bonds and Crude Oil. In FX, I have a bearish bias on GBP and a bullish stance on the USD, whereas NZD seems to be holding up on the crosses. Jpys and Aussie will likely be pulled around by US equity markets.
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