There is a busy week ahead as a number of Central Banks have meetings, two in relation to interest rates as well as 140 companies from the S+P500 reporting their results and updates on inflation and payroll.
As a consequence, with so much to happen latter in the week, Asian markets have been somewhat subdued with both the Nikkei225 and Hang Seng drifting lower, The Nikkei by 167 points and the Hang Seng by 140 points. As with the US markets on Friday, technology stocks are leading the decline after earnings from both Twitter and Intel on Friday disappointed the markets. There is a steady rotation out of growth stocks and into value stocks, such as the financials. This trend is expected to continue in the short term.
The Bank of Japan meets Tuesday and is expected to signal a move towards less monetary policy accommodation. The Yen has rallied significantly over the last few days in anticipation of this and the Japanese markets are eagerly anticipating the announcement.
The Federal Reserve meets on Tuesday and Wednesday and whilst no change is expected to the interest rate, forward guidance will likely confirm the gradual rate increases between now and the end of the year. A rate hike in September is now almost 100% expected.
The ECB meeting last week, did little to inject life into the Euro. The ECB confirmed that rates will not increase until the second half of 2019 and the reasonably tight range in the Euro looks set to continue for some time.
Sterling, though has seen much more expansive trading ranges, fluctuating between 1.3300 and 1.2950 in the last few weeks. A much anticipated rate increase this week may see increased volatility.
GOLD traded down to our target of 1220 and below but has bounced back to 1222 in early morning trade