Traders Turn To Risk On Sentiment As The Yen Finally Eases

It is amazing how quickly global sentiment can change. With the utterance of from the Bank of England. As soon as the BoE committee announced that at this time it would not be changing rates or adding stimulus markets gained confidence sending the pound up over 200 points while the Japanese yen tumbled from its safe haven highs and US stock markets continued to reach new highs.

In Australia, the benchmark ASX 200 closed up 23.06 points, or 0.43 percent, at 5,411.60, tacking on a 3.46 percent gain for the week.

Japan’s Nikkei 225 was the standout performer, adding a gain of 8.46 percent for the week, after closing up 154.46 points, or 0.95 percent, at 16,385.89. The Topix closed up 10.90 points, or 0.84 percent, at 1,311.16.

Across the Korean Strait, the Kospi closed up 3.22 points, or 0.16 percent, at 2,008.77, retracing losses of some 0.2 percent. The South Korean benchmark index is up 2.32 percent for the week.

In Hong Kong, the Hang Seng index closed up 238.69 points, or 1.12 percent, at 21,561.06. Chinese mainland markets closed mixed, with the Shanghai composite down 6.77 points, or 0.22 percent, at 3,053.91, while the Shenzhen composite finished up 3.2 points, or 0.16 percent, at 2,044.93.

Markets have rebounded in recent sessions on the expectation of further stimulus measures in Japan and in the UK. But analysts cautioned that if the expectations are not met by policy actions on the part of governments and central banks, market sentiment may be affected.

China’s economic growth held at 6.7 percent in the second quarter, beating the 6.6 percent expansion forecast in a Bloomberg survey. Figures for factory output, retail sales and new lending also topped estimates, while investment slowed. The U.S. also has a data dump coming on Friday, with gauges of household spending, inflation, industrial production and consumer confidence scheduled.

The Aussie gained this morning adding 17 points to 0.7648 climbing higher than the RBA’s desired level.  Although Australia’s cash rate is sitting at a record low 1.75%, it is still well above the interest rates offered in most other established economies around the world. The lack of easing bias introduced by the RBA at their July meeting may have improved investor confidence that rates will be left where they are as opposed to being lowered any further.

The kiwi on the other hand tumbled 51 points to 0.7147 as Chinese imports tumbled lower than expected weighing on the export economy of New Zealand.

The US dollar eased to 96.02 down again this morning by 8 points while the EUR/USD added 9 points to 1.1130.

The amazing action this morning is the British pound which soared another 120 points to 1.3462 after the BoE held rates and policy but promised stimulus in August. The banks reassurance that the UK economy was doing fine since the Brexit vote and the hopes that new Prime Minister May will move things forward quickly.