Asia Pacific Market Open Talking Points
- Soft UK PMI data triggered risk-on rally as British Pound[1] plummeted ahead of BoE
- RBA Governor Philip Lowe speech may bode well for the pro-risk Australian Dollar[2]
- All eyes on Donald Trump’s State of the Union address, Japanese Yen[3] may weaken
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Major Market Developments Tuesday
Global benchmark stock indexes generally extended their gains in another ‘risk-on’ rally as the S&P 500[5] matched its best winning streak since January 10 (5 days). The trigger seemed to stem from the United Kingdom after disappointing economic data crossed the wires ahead of this week’s Bank of England ‘Super Thursday’ event.
There, local services PMI clocked in at 50.1 versus 51.0 expected, the softest pace of growth since July 2016 which was a month after the Brexit Referendum. Looking at the chart below, UK government bond yields tumbled as the FTSE 100[6] soared. S&P 500 futures picked up on the gains, leading to the rally on Wall Street. Bets of a BoE rate hike later this year declined as the British Pound tumbled across the board.
GBP/USD and Market Reaction to UK Services and Composite PMI Data
Chart created in TradingView
This also seemed to be the case for Fed rate hike bets, notable since the central bank highlighted external risks to their outlook (a hard Brexit included). The US Dollar[7] aimed cautiously higher, perhaps due to the intense weakness in Sterling. But gains
