Caution ahead of ECB meeting keeps bulls in check while Chinese tariff exemption boosts risk appetite in the market.
Summary: Global equity markets are seeing positive price action today on the latest update from China. The Chinese government today made an announcement in which it had exempted several goods imported from the US from its tariff list which helped ease investors caution surrounding trade war between two nations. It also boosted expectations of trade talks between two nations albeit no concrete developments hinting at the date of the meeting had been made public by either party so far. While most major Asian benchmark indices and equities including Hong Kong market saw positive price action, the Shanghai market and major indices from the Shanghai stock exchange saw a loss for the second consecutive trading session today.
In European markets, equities opened positive as investor sentiment leaned towards bullish risk appetite on cues from the Asian market and easing trade war woes. Further, diminishing probability surrounding a no-deal Brexit scenario also helped improve risk on trading activity in European markets to some extent. In forex markets, caution ahead of ECB meeting tomorrow keeps demand for USD underpinned while major global currencies remain under pressure keeping price action mostly biased in favor of bears.
Precious Metals: Despite the boom in risk asset trading activity, firm US Dollar and easing trade war woes, rare metals are seeing healthy bid activity and positive price action in the global market today. The demand for safe-haven assets comes from caution ahead of tomorrow’s ECB meeting.
Crude Oil: Crude oil is trading positive in the global market for the third consecutive trading session today. The positive activity was influenced by the decline in US weekly API stockpile update and comments from Iraq stating demand issues and extension of production and supply cut agreement will be addressed in tomorrow’s OPEC meeting in Abu Dhabi.
AUDUSD: The pair is seeing positive activity today albeit slight decline in Asian market hours which was reversed shortly. Chinese tariff developments and healthy risk appetite underpin the AUD bulls helping offset dovish influence from firm USD resulting in pair trading steady slightly below mid-0.6800 handle.
On The Lookout: As demand for risk assets bloom in the global market, bond yields are also seeing recovery influenced by easing trade war woes. Aside from the latest developments in China-U.S. trade war and tariff exemptions, developments in UK political climate also influenced positive investor sentiment. Declining possibility of no-deal Brexit scenario grew stronger today following a ruling from Scottish judges who deemed parliament suspension as unlawful which combined with protests from opposing members increased the possibility of parliament suspension being cancelled. Re-opening of UK parliament will put a significant dent in efforts of PM Boris Johnson who is playing hardball with the possibility of a no-deal exit. Aside from these two events, traders focus in on OPEC summit set to occur in Abu Dhabi today which could help get a firm direction to short term future of Crude oil price. There is also caution ahead of tomorrow’s ECB meeting where policymakers are set to decide on the interest rate and possible easing measures to boost European economic growth.
Trading Perspective: In forex markets, caution ahead of the upcoming ECB meeting and firm USD are likely to keep major forex pairs trading in red across today’s US market hours. On the release front, US calendar will see release of Core PPI, EIA weekly crude oil inventory data and Canadian calendar will see release of Capacity Utilization rate update. US stock and index futures trading in the international market ahead of Wall Street opening were flat on mixed cues. Wall Street is likely to see muted activity today as investors exercise caution awaiting further updates on developments in the trade war and ECB meeting related cues.
EURUSD: The pair is trading in red today having endured considerable levels of loss and testing 1.09 handle as Euro reminded pressured ahead of upcoming ECB meeting where policy easing measures seem unlikely to be announced as per current investor sentiment. Further pressure from USD also weighs down EURO bulls. Traders now await US macro data for short term profit opportunities.
GBPUSD: The pair is trading positive albeit facing some level of pressure from firm USD in the global market. GBP bulls gained positive support on news of Scottish judges ruling parliament suspension as unlawful and increasing protests to reopen parliament which would but a dent in no-deal Brexit move. Traders now await US macro data for short term profit opportunities.
USDCAD: The pair is trading flat and has remained neutral for most of the day despite firm USD as the commodity-linked currency Canadian Loonie gained considerable support from gains on crude oil price action. Draw in US crude oil stockpile and expectations of OPEC supply cut extension during tomorrow’s meeting keep CAD supported causing USD bulls to remain under pressure. Traders now await the US and Canadian macro data for short term profit opportunities.
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