ASX Develops Up-Trend

The Dow Jones is now very close to breaking through 23,000 as the index reached another record high overnight. The S&P 500 was also up as both of these indices continue their relentless upward trend. The ASX has finally started following the US markets higher with the ASX 200 closing up again yesterday. The index is now at a five-month high and has developed some upward momentum after a sideways trend that lasted for many months.

Gold dropped quite sharply back below $1,300 per ounce later in the trading session as rumours suggested that John Taylor is now one of the front runners for the position of Federal Reserve chair. Taylor invented the famous Taylor rule that relates unemployment and inflation to interest rates. Using this rule, interest rates would need to be significantly higher than where they are now.

The AUD was weaker overnight, currently sitting at US$0.785 with no clear trend emerging in either direction. The competing forces of another expected rate hike in the US coupled with the RBA that is becoming more hawkish means that traders seem unsure which direction to push the currency.

Oil prices have become more volatile as the tensions in the Kurdish region of Iraq threaten to disrupt supply. The Kurds have voted to become independent from Iraq but the Iraqi government will not recognise this. Kirkuk, the main city in the region, produces around 10% of Iraq's total oil output and any disruption could therefore have a significant impact on supply. WTI crude prices spiked above $52 per barrel on the news that Iraqi forces were advancing on Kirkuk but prices have since receded back below that level, currently sitting at $51.87 per barrel.

   

Data Releases:

–    Australian Monetary Policy Meeting Minutes 11:30am AEDT

–    UK CPI 7:30pm AEDT

To view the Rivkin economic calendar and Local Markets matrix, members can click here.

This article was written by William O'Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.