This week has seen some significant market-changing events in the form of a more hawkish Fed, China’s release of key metal reserves, and the rise in demand for the use of the Fed’s reverse repo program. This has resulted in a stronger Dollar and a huge correction in commodity prices while stock markets are mainly weaker. Yesterday saw a record $756 billion parked in the Fed’s overnight reverse repo facility with analysts expecting this to rise even further to over $1 trillion. EM currencies, barring the Brazilian Real and Russian Ruble, remain on the back foot with the Rand trading weaker at 14.13 this morning. A sustained break of the 14.15 level could see further weakness up to 14.25 in the short term. Local Retail sales data out yesterday showed a YoY jump of 95.8% but this was off an extremely low base. The JSE All-share fell 1.08% to close at 66,585 as the Resource and Financial sectors took a hammering.
A combination of the resurgent Dollar and China’s moves to cool commodity prices saw a massive correction in commodity prices yesterday. Gold fell 2.0%, Platinum lost 5.3%, Palladium fell a huge 10.8%, while Copper was down a further 2.1%. There has been a bit of a recovery this morning with Gold currently trading at $1,785, Platinum at $1,074, and Palladium at $2,551. Oil has also retreated with both WTI and Brent down around 0.75% this morning at $70.53 and $72.50 respectively.
The DXY index is up at 91.92 this morning despite bonds yields falling and a weaker than expected Jobless claims number yesterday. Markets are still digesting the Fed’s FOMC statements while there appears to be some reduction in short Dollar positions. The Dollar is trading at 1.1901 against the Euro and 1.3897 against the Pound this morning while the US 10y yield is down at 1.51%. Wall Street closed mixed last night as the Dow and S&P fell but the Nasdaq showed a strong 0.87% gain. US futures are trading in the green this morning while Asian-Pacific stocks are mixed.