It has been an interesting day to say the least as one important headline after another caused shock waves through the market. First, it looked as it appeared Greece had a deal in place with the ECB – and then they didn’t. In the UK, the Bank of England has raised GDP forecasts for 2016 and 2017 in a more hawkish quarterly inflation report – but stated they would not hesitate to cut rates if warranted. And finally, a ceasefire has been agreed upon in Eastern Ukraine beginning February 15th – but who knows when Vladimir Putin is involved. When the dust had settled, and North America slumped into their desks this Thursday, global equities were all trading higher and for at least one day, everything seemed sort of OK in the world – for now.
The euro surged higher on Wednesday just before the close as CNBC reported a bailout extension had been agreed upon with Greece and the ECB. Those rumors were short lived though as both ECB and Greek policy makers stated no deal was in place and negotiations were on-going. It ended up being a good day for “risk” though as it was confirmed a ceasefire has been agreed between Ukraine and pro-Russian separatists in Eastern Ukraine. Participants at the summit in Minsk, attended by the leaders of Germany, France, Russia and Ukraine, said the ceasefire would begin on February 15th followed by a withdrawal of heavy weapons from that region. The good news spread to the UK as Governor Carney at the Bank of England said the economy was close to being back to running at full capacity. Despite a fall in inflation on the back of oil’s price drop, Mr. Carney said he did not anticipate deflation in 2015 and upgraded growth forecasts for 2016 and 2017. Finally, in Sweden, the Riksbank cut rates below zero and decided to embark on their own QE program, which caused a brief sell-off in the krona.
It was not all good news as Australia released its jobs report for the month of January. The economy lost 12k jobs last month and unemployment jumped to 6.4%, which weighed heavily on the Aussie dollar. This news further supports the argument for monetary easing from the Reserve Bank of Australia, which just cuts as recently as last week. In Japan, core machinery orders for December were higher 8.3% against expectations pinned closer to 2.4%. The yen was trading higher as a result of this news, giving sellers another opportunity to enter below the psychologically important 120 level.
In the US, weekly jobless claims were back above 300k for this week and retail sales for the month of January were down 0.8%. The US dollar, which has been taking a hit to begin the session, experienced another bout of selling on the disappointing data. The Canadian dollar found a bid today, rising along with other risky currencies on the Ukraine agreement. The USD/CAD rate continues to pivot around $1.25 as local economic data remains scant. For right now, the loonie is being led by more broad events in the marketplace. Going forward, markets will no doubt be hanging on every Greece headline through negotiations being held until a supposed decision on Monday.
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