Sino-U.S. trade

Dovish ECB Member Comments Hurt Risk Appetite, Wall Street to Trade on Earning Update Cues

Sino-U.S. tradeRisk Appetite took a hit in European markets despite positive cues from Asian markets. Investors await macro data updates for trading cues amid lack of headlines on geo-political events with price action remaining mostly range bound.

Summary: Global equity market is seeing positive price action with bullish bias controlling investor sentiment in most major markets. While US Wall Street saw major indices take a hit on woes induces by disappointing bank earnings reports, Asian market saw major benchmark indices and equities on all major stock exchange trade and close on positive note. Optimism surrounding Sino-U.S. trade talks and expectations for stabilisation in the Chinese economy helped market bulls maintain positive price action on key risk assets. While European markets also saw positive opening in major indices and equities, several benchmark indices and key equity markets took a dovish turn as several ECB members expressed doubt on possibility of growth projections for second half of the year which hinted at market recovery. As growth forecast for latter half of the year took a hit, German government bond yields slipped back near Zero causing risk appetite to drop slightly in European market hours. Forex market saw major global currency pairs take a dovish turn during today’s Asian and European market hours.

Precious Metals: Despite risk appetite taking a hit during European market hours and several major equity benchmark indices and key forex pairs trading in red, precious metals failed to see recovery price action today. While bearish influence on global market is clearly visible today, trade talk related optimisms continue to support market bulls facilitating higher bullish bias in the market. This has resulted in both Gold and Silver trading in red across Asian and European market hours.

Crude Oil: Crude oil price continues to trade with bearish bias in the global market today. However, the decline in price action is less compared to previous session. Weak cues from major markets, reports which suggest OPEC and Russia are likely to increase output to compete with US producers to fight for recovering market shares given the fact that production has already declined in OPEC member nations below targeted levels are factors supporting Crude oil bears in the global market.

AUD/USD: The pair saw a sharp fall after the release of RBA meeting minutes which displayed dovish tone. Post decline in early session, the pair continued to see consolidative price action near intra-day lows. Risk averse investor sentiment in European market further dampened sentiment towards risky assets and forex pairs resulting in subdued price action. Investors now await US macro data for short term profit opportunities.

On The Lookout: Given the fact that market lacks major impact macro headlines or events today, price action in the global market is dictated by broad based investor sentiment and macro data updates. Both EU and UK saw mixed macro data outcome but they failed to have any visible impact on price action of EURO or GBP. Following dovish comments from ECB policy committee members who expressed doubts on possibility of recovery rally during later half of year, risk appetite has taken a hit and both Euro and GBP trade flat with slight bearish bias in the market. Geo-political events continue to remain as main focus of investors across the globe, but all three events in focus have come to a standstill. On Brexit front, UK lawmakers need to begin making moves with visible impact for progress, while E.U.-U.S. trade talks are yet to begin. On the other hand, following reports that talks between China and U.S. has entered its last leg, news relating to same has quieted down. Any progress on Sino-U.S. trade talks will influence the next leg of major price rally in the market ahead of which major markets are likely to see range bound price action with slight volatility influenced by macro data updates. On the release front tonight, US calendar will see the release of Industrial production, manufacturing production and API weekly crude oil stockpile data. Canadian calendar will see the release of foreign securities purchase and manufacturing sales data updates.

Airbus Trading Perspective: Wall Street is likely to see subdued price action as earnings updates are likely to continue weigh down market bulls. Forex market will also see range bound price action with macro data cues influencing short term price rally paving way for profit opportunities.

USD/CAD: While the pair tested 1.34 handle overnight on dovish BOC business outlook, it failed to hold fort and establish steady rally or climb further above said price levels. However, weak crude oil and subdued risk appetite continues to support USD bulls keeping the pair stable above 1.33 handle. Investors now wait for macro data updates for short term directional cues. But it is highly unlikely for the pair to establish steady rally over 1.34 handle in immediate future.

EUR/USD: The pair traded with slight bearish bias for majority of the day on dovish comments from ECB members. But the pair erased most of the early loss and traded in flat note in late European market hours as positive German ZEW economic sentiment data post which the pair is trading range bound awaiting US macro data updates for further short term trading cues and profit opportunities.

GBP/USD: The pair continues to trade range bound with clear bearish bias as lack of further progress in Brexit post deadline delay continues to weigh British Pound in the global market. Aside from Brexit influenced Bearish bias, the pair also saw dovish influence from disappointing macro data update. Investors now await US macro data update for short term trading cues and positive US macro data will lead to further loss for British Pound.