Talking Points:
• Last week's impressive risk appetite run picked up where it left off as Equities and EM posted rallied
• An anchored Fed forecast may have sparked speculative appetite, but it hasn't overturned Dollar strength
• Top theme event risk ahead is 'global headwinds' while the more concentrated event will be the RBA decision
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The risk appetite rebound from this past week carried through to Monday. Equities, emerging markets and high yield surged higher to start the week. A delayed Fed hike contributed to optimism through the end of the past week, but that speculative leverage hasn't carried through as a robust driver into this new week. The weak showing on labor statistics last Friday is a fundamental contrast to growth, and this past session's ISM service sector report offers a counterbalance to the stimulus-for-longer outlook. Given service sector jobs account for a majority of positions in the world's largest economy, the strong showing for the PMI's employment component curbs belief that the Fed can hold forever - much less that it will return to QE. The Dollar's rebound is testament to the contrast for rate expectations as a speculative drive. With doubt in mind as to the bias of risk trends, we head into a weak where high profile themes - global 'headwinds', emerging market volatility, China - come back into focus. For more concentrated risk, the RBA rate decision is a key event that can trigger short-term volatility fears. We look at theme and catalyst in today's Trading Video.
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