Geopolitical tensions have come to the fore once again and investors are shunning risk assets. Classic moves into the Yen, gold and dollar were the theme of yesterday’s session and once again questions are being raised about the sustainability of the equity market strength with the rally now looking a little long in the tooth.
This morning at least there are tentative signs that yesterday’s initial reaction to the situation in Ukraine may have been overdone with the Yen reversing gains, so USDJPY which had run down towards the 101.00 level is a little higher trading at 101.35 and gold has given back some of its gains, trading at 1312 at the time of writing. Investors will keep eyes firmly trained on not only Ukraine, but the Middle East where geopolitical tensions are also mounting continuing to shape investor sentiment.
Today is quiet in terms of economic data with only Canadian inflation and Michigan Consumer Sentiment being the major releases that could move the markets. The Loonie has been one of the main beneficiaries of the dollar weakness in 2014 with USDCAD falling some 4.5% since its March highs. July has so far seen a bit of a dollar comeback with USDCAD trading at 1.0750 and a softer Canadian inflation figure could give USD further momentum to test 1.0830.