Valentines Day Massacre Coming?!

We saw a bit of a calm before the possible storm in yesterday’s trading as markets consolidated at recent levels. The equity markets had a bit of a mixed day with European indices finishing in the red but their US counterparts managing to finish the US session in the black. The currencies remained relatively range bound with the dollar still remaining offered and the DXY trading down to the 89.70 level.

We saw slightly stronger than expected CPI numbers out of the UK which lent some short term strength to the sterling and helps to reinforce the Bank Of England’s recent more Hawkish sentiment. The yen continued to appreciate and it made further fresh 5 month highs against the dollar under 107.50 after stops were triggered under the 108.00 level. The other majors are all trading at more familiar levels, although there is a bit more pressure on the commodity currencies, especially CAD as Oil is back trading under $60 a barrel.

Looking ahead to today’s trading and as we’ve been talking about most of the week we have the crucial US CPI data due later today. This is always a big risk event but has taken on even more precedence after last week’s excessive volatility across the financial markets. A strong print to the topside could see further rate hike expectations, yields increase, a big appreciation in the dollar and another big hit for the equity markets – and it’s this scenario that has the markets trading in a slightly more nervous manner than normal.

It’s relatively quiet again on the fundamental data front, although Kiwi traders will be watching the Inflation data (due at 1pm) closely for the next step in the flightless bird. We do have some GDP numbers out in Europe but really it’s all about those US CPI numbers today – due at 12.30 am Sydney time.

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