A Volatile Day in the Markets

Yesterday was a volatile day in the markets as far as both currency and stocks were concerned. The first part of the day saw the US dollar gain in strength across the board as the Fed Chief Yellen made it clear that the markets can expect the Fed to hike rates in the coming months as long as the data continues to come in strongly. This helped to boost the dollar and we saw USDJPY trading above 115 for a brief while as the risk on tendency returned to the markets.

We then had the ECB rate statement and the following press meet which was addressed by Draghi where he made it clear that the ECB does not plan to make any changes to the QE for the next few months atleast. This weakened the euro which went below 1.0600 for a brief while. Then we saw a period of dollar weakness set in the markets.There did not seem to be any specific driver to this weakness in the dollar but the fact that the Trump team is set to take charge today might have had a hand in this move down. This helped the euro recover back its entire fall and it trades just below 1.0700 as of this writing and looks good for more as the dollar index consolidates for today.

In the morning, we had the Chinese data throwing up some good numbers which was largely in line with what the markets were expecting but it has to be noted that all Chinese data are controlled by the government and hence must be taken with a pinch of salt. Looking ahead to today, we have the retail sales data from the UK and Canada and we also have the CPI data from Canada which should ensure some volatility in the markets. We are heading towards the end of a volatile week and there might be some squaring up of positions going into the weekend and so traders are advised to trade with caution.