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It’s a two-speed world out there

Prepared by Jeff Halley, Senior Market Analyst


It’s a two-speed world out there

The earnings juggernaut continued on Wall Street today with reports mostly above expectation. However, the major indices had a consolidative look about them after the S&P and Nasdaq had record closes the day before, with the S&P and Dow Jones both falling 0.22%, and the Nasdaq dropping 0.23%.

The main attraction was after hours though, with Facebook, Microsoft and Visa all reporting excellent results, in Facebook’s case net of provisioning for fines. Tesla also reported after the bell and disappointed again, cementing a remarkable multi-year display of being consistently disappointing. The positive after-hours results should set up Asian markets for a positive start to the day.

One cloud on the horizon has been the disappointing South Korean GDP data this morning, which shows the economy shrunk by 0.3% in Q1 – the first contraction in five quarters. Further divergence in the global economy was highlighted last night with Germany’s IFO disappointing, and the Bank of Canada (BOC) downgrading growth assessments and removing all traces of hiking bias from its post-rate decision statement. This follows low Australian CPI data yesterday.

In all likelihood, Asia’s equity markets will ignore the stark warnings today as data and central bank decisions scream two-speed global economy. The global bond markets are certainly not aligned with government bond yields tanking in developed markets such as Canada, Europe and Australia. Time will tell if the US and China lift the rest of the world up or the rest of the world puts the brakes on the US and China. That’s a story for another day but will undoubtedly make the second half of 2019 as interesting as the first.

Currency markets roared to life overnight with both the Aussie dollar (AUD) and New Zealand dollar (NZD) tanking on lower-than-expected Australian CPI numbers. The Canadian dollar (CAD) fell 0.45% against the greenback touching 1.3500 after the rate hike surrender by the Bank of Canada. The euro (EUR) and British pound (GBP) vs the dollar both sank following weak German IFO data, hovering just above 1.1200 and 1.2900 respectively.

Once again, it was the day of the dollar, and a look at the US yield vis-a-vis most developed markets implies it could turn into the year of the greenback.

Asia’s highlight will be the Bank of Japan (BOJ) rate decision, with no change expected to its overnight rate or JGB yield targeting. Today’s decision will be interesting as it comes just before Japan’s extended Golden Week holiday this year, which is actually closer to two weeks this time due to the Emperor’s abdication. As ever, timing is important here as the BOJ has no set release time. Generally speaking though, the further after midday Tokyo that we don’t hear an outcome, the higher the chance there is of a big surprise. It’s happened before.


All eyes will be on the AUD and its Kiwi cousin this morning, following yesterday’s CPI induced sell-off. The AUD sits at 0.7010, just above long-term support at 0.7000. The Aussie dollar has spent a grand total of one day below 0.7000 in the past three years, so a daily close below this level later this evening will be technically significant – a weekly close below 0.7000 tomorrow night could be even more so. Both Australia and New Zealand are closed for ANZAC Day meaning liquidity will be much reduced.

With the CAD also falling out of bed overnight and disappointing South Korean data this morning, regional currencies may well be on the back foot initially as the US dollar hegemony continues.


Tesla aside, the sparkling after-hours results from Wall Street will continue the collective sigh of relief felt by regional stock markets this week as US earnings season exceeds expectations. Local bourses will likely enjoy a positive start to the day.


A much higher-than-expected rise in official US inventories stopped WTI in its tracks overnight, falling 0.85% to US65.85 a barrel. Brent Crude remained unchanged at US74.75 a barrel, in a remarkably sedate day by oil’s recent standards. The price action has a consolidative look about it after the recent Iran-induced rallies.

With Brent Crude so firmly in backwardation and the geopolitical risks still alive and kicking, it’s hard to see oil’s quiet overnight season as anything but a temporary lull.


Gold traded to the upper end of is recent USD1,270/1,275 .00 an ounce range overnight on no apparent news of note. With Golden Week starting in Japan tomorrow and approaching the 1 May holiday seasons in much of Asia, the yellow metal may benefit from some risk-hedging buyers over the next two days.



This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Andrew Robinson

Andrew Robinson [3]

Senior Market Analyst at MarketPulse [4]
A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentary and live market analysis throughout the Asia-Pacific region. Having previously worked in Europe, since moving to Singapore he worked with several leading institutions including Bloomberg, Saxo Capital Markets and Informa Global Markets, proving FX strategies based on a combination of technical and fundamental analysis as well as market flow information. Andrew began his career as an FX dealer with NatWest and the Royal Bank of Scotland in the UK.
Andrew Robinson

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