Market News & Insights
7 April 2017

Markets Look to Play it Safe

This morning markets are continuing to remain volatile on the back of last night’s US cruise missile strikes on Syria. It had been an edgy week for investors prior to this as equities came under pressure after the FOMC minutes showed the Fed’s plan to start unwinding the central banks enormous balance sheet before the year end. While the air strike on the Syrian airfield wasn’t in itself a huge surprise, after Secretary of State Tillerson earlier in the week stated that recent events required a “serious response”, it was however the quick nature of the strike that caught markets napping.

The market moves were swift once the headlines filtered through, oil and safe haven assets all jumped higher. Crude prices surged 2 percent to $55.99 a barrel, while gold was up 1.2 percent. Safe haven currencies were also high with the Japanese Yen and the CHF both gaining. There wasn’t however much of an impact on the major crosses for USD, EUR or the pound. EURUSD continued to trade sideways this morning below the 1.07 area, while GBPUSD also trades in a relatively flat line after failing to break above 1.25.

Back to economic policies, where markets continued to digest the FOMC minutes throughout yesterday. Global equites and US futures both ticked lower after the minutes showed the Fed decision to look at shrinking the banks’ balance sheet. One factor that will resonate in the mind of investors here is the Fed’s concern regarding high stock prices. While US House Speaker Paul Ryan also added to the pessimistic mood yesterday when he indicated that Congress was still not on the same page in terms of Trump’s tax return. For now markets focus will turn to today’s discussions between the leaders of the US and China, while this afternoon we have the Non-Farm Payroll figure. The US is expected to have added 174K jobs in the month of March.

In the single currency region, we saw ECB President Mario Draghi deal a blow to the hawks who were looking for a reduction in the central banks stimulus and an increase in their deposit rate, stating it was still too soon. The euro fell sharply on the back of these remarks but recovered most of these losses throughout the day.

The UK also has data across the wires this morning with UK production and trade balance numbers. Data from the UK has started to slightly fade, with this week’s PMI numbers mixed. This morning’s production figure missed market expectations coming in at -0.1 percent, while the trade balance figure was also worse than expected at -12.5B. Brexit headlines will continue to be the main driver for the pound, and we expect more volatility to come later in the month when the EU nations begin drawing up their guidelines.