Please attribute the following comments to Stephen Innes, senior trader at OANDA Asia Pacific
China in your hands
The focus right now is on China ahead of the G20 meeting taking place in Shanghai at the weekend. Chinese policymakers are keen to reassure the markets that they have no major devaluation of the yuan up their sleeves, and that they can successfully carry out their structural reforms.
The great and good from across the world’s top centrals banks and governments will have a lot to talk about at the G20 meeting, with the current market volatility and global economic slowdown high up on the list.
This has led to a pre G-20 rally which took hold of the markets last night in the wake of the US Durable goods data which also provided a much needed boost to investor confidence, coming in at 4.9%. The data suggests the beleaguered US economy is not running out of steam as the doom-and-gloom advocates suggest.
Black gold on the rise
WTI traded above $33 per barrel as traders covered speculative bets in the event that G-20 ministers come up with some creative ideas to stimulate the global economy. With the expansion of fiscal stimulus packages the flavour of the day, the weekend’s G20 outcome hinges on some creative expansion of global fiscal policy.
Oil prices also got a shot in the arm after news reports said Venezuela’s oil minister would meet with fellow oil producers next month in an effort to stabilize prices.
Aussie dollar edges up
With the boost in investor sentiment coupled with the jump in oil prices, the Aussie dollar has traded favourable above the 72.00 threshold. Coupled with the doubts continuing about whether or not the Fed will follow through with rate hikes, and this has left the Aussie looking well supported.
With the G-20 likely to dominate investor focus today, we should expect volatile yet range-bound markets to persist as the wild oil market swings continue to drive trader sentiment. Also, the carry over short-covering effect from this week's oil inventory data is likely to accelerate as we near the G-20 summit.
Despite this glimmer of optimism that we are seeing leading up to this weekend's G-20 summit, the likelihood of a coordinated policy pact is doubtful. Instead, the big fear is that whatever sliver of optimism investors currently have in an otherwise dreary outlook will be further eroded after the summit. So we could be in for some messy markets next week.
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