Hang Seng Rally, FOMC Members Split

April 9, 2015 9:34 AM

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The Hang Seng rallied strongly for a second day as Chinese buying via the Shanghai-Hong Kong Stock Connect program drove demand. Trading volume into Hong Kong was the highest since the program began. Heavy inflows is now pushing HKD towards it upper trading band limit. However, the massive outflows came at a price, as investors probably sold Shanghai (down 1%) to fund Hang Seng purchases. In broader terms, we suspect that Asia equities will outperform European and US peers as expectations that the BoJ will add additional stimulus and regional power house, China will continue to move proactively to support soft growth through fiscal and monetary policy stimulus. USDJPY consolidated recent gains around the 120.30 levels. USDJPY needs to break 120.50 resistance to extend current bullish trend towards 122.05 highs. USDCNY fix was set at 6.1338, 10 pips lower then yesterday. Elsewhere, Brent crude oil tumbled over 4.5%, as data showed an increase in inventories. Oil volatility continues to rise. The fall was especially felt in USDCAD, as the pair rose to 1.2574. USDCAD near term target stands at 1.2785.

US Federal Reserve continues to throw uncertainly into the market, like delayed volatility hand-grenades. Generally it takes a bit of time for markets to absorb and price in the information. Prior to the anticipated March 17-18th FOMC meeting minutes release, NY Fed President Dudley stated "our inte...

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