Article / 08 February 2018 at 22:20 GMT

US Wrap: Wall Street gets whacked, again

FX Trade Strategist /
  • Wall Street took a fresh beating on Thursday
  • The Bank of England hinted at a May rate hike 
  • US Initial Jobless Claims drop to 221,000, but this data doesn't matter
  • The Canadian and Australian dollars were hurt by falling commodity prices
By Michael O’Neill

NY Focus: The US dollar opened on a mixed note on Thursday. EUR, CHF, AUD and CAD were modestly lower, GBP and NZD were a tad firmer, and JPY was unchanged, compared to Wednesday’s close in New York. Forex markets shifted into risk aversion mode.

The Japanese yen and Swiss franc were the only currencies to gain against the US dollar, the commodity currency bloc lost ground and EURUSD and GBPUSD finished unchanged for the day.

 WTI retreated on Thursday, following gains for the US dollar, expectations of faster rate hikes and rising crude production. Photo: Shutterstock

Sterling traded in a world of its own.  that was because of the Bank of England policy meeting, Quarterly Inflation Report and Governor Mark Carney’s press conference. The Bank of England left rates unchanged. The Quarterly Inflation Report caused a stink with the following line: “The Committee judges that, were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report, in order to return inflation sustainably to the target.”

After the release of the BoE report, GBPUSD spiked to 1.4065 from 1.3868. But plunging US equity prices erased that move, and GBPUSD finished the session at 1.3900.

USDJPY opened at the day’s peak and slid steadily, pacing the Wall Street decline. NZDUSD outperformed the commodity currency bloc, managing to close the day on an up note. CAD and AUD were hurt by falling commodity prices.

Wall Street got whacked. The Dow Jones Industrial Average opened at 24,902.30, dropped to 24,229.66 by lunch and then attempted to rally. Prices inched up to 24,527.18 by the middle of the afternoon and the sellers came back with a vengeance. The session closed with the DJIA down 1,032.89 to 23,860.46, for a year to date return of minus 3.47%.

Crude oil prices took it on the chin as well. US dollar gains, expectations for a faster pace of rate interest rate hikes and rising US crude production drove WTI oil down from $62.06/barrel to just $60.30/b

Friday Focus: Equities! Equities! Equities! Nothing else matters. Even the newest of traders are aware that the DJIA lost 54% of its value between October 2007 and March 2009. If history were to repeat itself, the DJIA could have 12,243.36 in its future. 

No wonder people are nervous. Sure, this time is different, but...

Daily DJIA chart

Source: YahooFinance. Create your own charts with SaxoTrader; click here to learn more

– Edited by Robert Ryan

For more on forex, click here.

Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.

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I closed out all my positions and bought Twitter yesterday. No not really but probably not a bad idea actually.
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Twitter, Snapchat and Ten Cent. Who needs anything else? Oh yes, forgot Cannabis Coin. Load up on that one.


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