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- Markets are dominated by news that the US Presidency and the House of Congress agreed a deal yesterday which will finally put an end to the debt ceiling crisis. The agreement stipulates both cuts in spending and a raising of the debt limit, and makes it clear the US will not default on 5th June. Risk assets were slightly higher on the news, after some stock markets made very strong gains at the end of last week, notably the NASDAQ 100 Index which broke strongly to reach a new 1-year high price. Attention will now likely turn to the next Fed meeting due in June.
- In the Forex market, the US Dollar has sold off weakly, against its long-term trend. Action has been dominated so far today by weakness in the Swiss Franc and strength in the Australian Dollar – both make sense in terms of a risk-on rally. Trend traders will probably be looking for long trades in the USD/JPY currency pair (the Asian session saw it reach another new 6-month high price) while short NZD/USD may also be attractive. The Kiwi remains weak after the RBNZ last week signalled that its terminal rate had been reached in a surprise move.
- Turkey’s President Erdogan won the second round of the presidential election after being forced into a runoff against his main opponent. Markets have reacted by continuing to sell the Turkish Lira as there is generally little confidence there in the President’s monetary policies, with the Lira reaching a new all-time low against the US Dollar almost every day.
- There will very probably be thin liquidity in markets today as it is a public holiday in both the USA and the UK, two major markets, especially in Forex.
- There will be a release later today of US CB Consumer Confidence data (expected to show a small decline).
- There will be a release of Australian CPI (inflation) data tomorrow, which is expected to show a small increase in the annualized rate from 6.3% to 6.4%.