U.S. senate meeting to assess health implications of re-opening U.S. economy in focus, risk sentiment remains high on cues from China relaxing tariff on U.S. goods import.
Summary: Global equities are seeing positive price action today led by cues from China. Headlines hit the market in Asian hours, stating that China has waived off tariffs on a list of 79 U.S. goods from its retaliatory tariffs, which went live during the peak of the Sino-U.S. trade wars. This waiver announcement is set to come into effect from May 19th, 2020, and is expected to remain active for a period of exactly one year expiring on May 18th, 2021.
This update, along with previous announcement from the central bank of China promising more supportive policy measures, has helped risk sentiment in the global market gain strength considerably. Later in European market hours, positive earnings helped cement risk sentiment in the international market causing major indices and key equities in the European market to maintain positive price bias.
Precious Metals: While risk sentiment has improved considerably in the global market, safe-haven metals gold and silver are continuing to enjoy positive price action. Gold and silver both display a positive tone in price action. Still, the price remains trapped within familiar levels near previous session highs as short bursts of a fresh COVID-19 outbreak as countries ease lockdown measures keep rare metals fundamentally underpinned.
Crude Oil: Crude oil price is trading positive in the global market today on both major international benchmarks Brent and W.T.I., and their futures. While developments in China have helped improve demand outlook, news of U.A.E. & Kuwait joining Saudi Arabia on additional output cuts with 100,000 b/d & 80,000 b/d greatly helped improve overall demand to supply ratio. This helped prop up fundamentals surrounding global crude oil market activity.
D.X.Y.: The Dollar index, which measures the strength of U.S. Greenback against six major currencies, has declined below the 100 mark today as cues from China’s move to relax tariffs on U.S. import goods helped alleviate safe-haven demand in the market. But lingering caution on small pockets of fresh covid-19 outbreak amid easing lockdown measures across the globe keeps USD bulls underpinned for the time being.
On The Lookout: Overall risk sentiment in the market remains positive in the short term, but cautious outlook keeps long term bias in red as there are fresh pockets of the covid-19 outbreak across major countries. Such outbreaks stem from countries easing their lockdown measures, causing fears for renewed large scale global pandemic. In the U.S.A. the senate is set to hear testimony from senior health officials and experts on implications of re-opening U.S. economy given various states lockdown easing measures.
The hearing is expected to occur via teleconference meeting, but given a declining death toll for the 4th consecutive day in the U.S.A., it remains to be seen if the testimony will have any major visible change to lockdown easing measures. Aside from the slew of Fed members speech later in the day, U.S. market hours will also see release of Core C.P.I., April month Federal Budget Balance and API weekly crude oil stockpile data on economic calendar front and release of quarterly financial data from Duke Energy, Ingersoll Rand and Macerich on the earnings front.
Trading Perspective: U.S. stock & index futures trading in the international market were positive over tariff relaxation developments from China as it gives a significant boost to lockdown easing measures carried out in the U.S.A. Hopes for positive economic developments helped improve risk sentiment in the U.S. market, causing pre-market investor sentiment to display a high level of risk appetite. But gains are likely to be capped in early session as traders await an update from U.S. senate meeting to consider the health implications of re-opening the U.S. economy.
EUR/USD: The pair has recovered from losses incurred in the previous session and displays stability above the mid-1.08 handle. But most of these gains are from broad market USD sell-off influenced by risk sentiment rather than EURO’s own fundamental support. This suggests a possibility of the pair moving back below 1.08 handle in case of recovery in USD. Traders now await U.S. senate update and macro data for short term profit opportunities.
GBP/USD: The pair is mostly trading flat, having failed to build a recovery rally influenced by USD’s weakness in the broad market. While the pair tested as low as 1.2288 earlier in the day, the British Pound has managed to stabilize above the 1.2320 handle in the European session. The overall directional bias continues to retain dovish tone while traders await U.S. senate update and macro data for short term directional cues & profit opportunity.
USD/CAD: The pair is trading flat, albeit having retained hold above 1.40 handle for the short term. Improved risk sentiment in the market and recovery in crude oil prices has put a halt to USD’s momentum. But USD still holds firm on account of lingering caution and safe-haven demand in the market over renewed small scale bloom of COVID-19 outbreaks across the globe. For now, the price keeps oscillating around 1.40 handle falling below the mark on multiple occasions. Traders are waiting for U.S. senate update and macro data for short term directional cues & profit opportunity.
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