Saturday August 22, 2015 - 11:01:07 GMT
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Equity Correction Upsets USD
John M. Bland
China, Oil, And Fed Uncertainty Persists The focus of trade in the latest week has been on the corrections in major equity markets, The PBOC decision to "devalue" the Renminbi in the prior week has been a partial trigger for the equity correction, because many U.S. companies depend on China for earnings. On Friday, a flash PMI report from China was disappointing, and added to the China worries. A second trigger for the equity sell-off was the decline in oil prices, due mainly to concerns about excess supplies, which weighed on the energy majors (stocks). Lastly, confusion about Fed policy has added to the headwinds facing the markets. A majority opinion of Fed experts still favors a rate increase in September, but a growing minority is now looking for a December lift-off following the FOMC Policy Minutes released on Wednesday Current Fed policies continue to favor asset price inflation.
Forex Market Developments I have looked for connections between markets for my entire career. I have felt vindicated in recent years that many of the "algos" now engage actively in trade using inter-market correlations. As I have pointed out over the past several weeks, there is a distinct negative correlation between the S&P index and EURUSD. The price of oil also can heavily impact the S&P when the oil price is falling. As oil falls, energy stocks weaken and as equities weaken the EUR strengthens. Thus as a trader, you ignore these markets at your peril.
Weekly Calendar The upcoming week is an active period for major economic data. -- Monday, August 24, No Major Data. -- Tuesday August 25, DE- Ifo Survey US- flash Services PMI, Consumer Confidence, New Homes Sales. -- Wednesday August 26, US- Durable Goods, Crude Oil Inventories. -- Thursday August 27, US- Preliminary GDP, Weekly Jobless, Pending Homes Sales. -- Friday August 28, JP- CPI, GB- Revised GDP, US- Advance Trade, core PCS Deflator, Final University of Michigan Survey. Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland co-founder www.global-view.com
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