Fed rate cut expectations and chip sector gains underpinned market risk appetite but caution on geopolitical event proceedings kept gains in check. US Payrolls and Powell Speech in focus.
Summary: The global stock market is seeing positive price action today following cues from Wall Street activity yesterday. While Wall Street indices and stocks closed on a positive note, gains were still capped on account of cautious investor sentiment over concerns of global economic slowdown influenced by recent development in global tariff wars.
Asian market took cues from Wall Street and opened positive, but limited trading volume and liquidity on account of holiday in Chinese markets and cautious investor sentiment kept gains in check.
Comments from Apple stating that it is going to boost its production of the latest iPhone models boosted the value of chip sector gains which played a major role in gains in equities today. Further, investors across the globe are expecting a rate cut by the US Federal Reserve following a recent string of disappointing macro data outcomes in the US economic calendar update.
European markets took cues from international markets and saw equities and benchmark indices open and trade on a positive note. Expectations of a Fed rate cut and chip sector gains gave considerably boost to trade-dependent economy albeit gains being capped on account of investor caution given Europe’s reaction to US tariffs on European goods.
In Forex market, USD index –DXY which is used to measure the strength of US Greenback against six major global currencies saw a sharp fall in value ahead of an upcoming speech by Fed Chair Jerome Powell and US Payroll data while improved risk appetite favoured market bulls helping major high-risk forex pairs see positive price action.
Precious Metals: Rare metals market saw positive price action despite improved price action in the stock and forex market today. As investor remains cautious and skeptical on proceedings of geo-political events ahead of upcoming trade talks, weaker USD helped rare metals see a fresh influx of funds keeping price action in favor of gains in gold, silver, and other safe-haven metals.
Crude Oil: Crude Oil price is seeing positive price action in the global market post ten consecutive sessions of declines. However, given the price trend and momentum, the price of crude oil is set to see weekly losses. Demand to supply ratio remains in favor of crude oil bears as Saudi Arabia recently reported that its oil production activity and capacity are back to pre-attack levels.
AUD/USD: The pair is trading positive in the global market today as AUD bulls gained momentum on improved risk appetite in the global market while USD weakened ahead of upcoming payroll update and Powell speech. Rate cut expectations by the Fed, given recent dovish data, weighs down USD considerably which keeps USD bulls under pressure as the trading session comes to close for the week.
On The Lookout: Geopolitical events that are driving price action in the global financial this week are signaling further crisis in upcoming weeks unless drastic measures are put in place. As WTO pointed out recently a prolonged trade war is bad for global economic growth. Given that it was the impact of just one prolonged trade war, a dual-pronged attack which targets another major trading partner – one which contains more than 27 markets which are business with the USA could very well be impetus to the destruction of US economy and lead to a considerable loss in the global economy on the whole. It has been 16 months since the trade war with China began and there are no signs of any resolution yet, meanwhile, the latest tariffs on EU from the USA saw EU retaliate by keeping US islands on tax blacklists while exempting UAE and Switzerland from its list of countries deemed to be acting as tax havens.
Further, unrest in the EU amid ongoing Brexit uncertainties are worrying traders on the possibility of another trade war breaking out – this time between the USA and the EU. As the trading session comes to close for the week, major geo-political issues have taken a backseat while the focus shifts to US macro data updates and Fed Chair Powell’s speech later in the day which could provide short term profit opportunities and directional cues for short term trading activities.
Trading Perspective: The outcome of US Payroll data and signal from Powell’s speech on the possibility of a rate cut by the Fed will greatly affect the price action of major forex pairs in North American market hours. Despite improved risk appetite in the global market, lack of clarity on the possibility of a rate cut in the upcoming FOMC rate decision meeting gives widespread concerns of the US market possibly entering into a recession, keeping US stocks and index futures trading in the international market under pressure ahead of Wall Street opening.
On the release front, the US economic calendar sees the release of Average hourly earnings data, Non-Farm Payroll data, Unemployment rate, Trade balance data and a speech by Fed Chair Powell later in the day, while the Canadian calendar sees a release of trade balance and IVEY PMI data.
EUR/USD: The pair is trading positive in the global market given prevalent risk appetite and USD’s weakness. USD bulls faced pressure from increasing odds on a possible rate cut by US Federal Reserve in upcoming meetings given the recent string of disappointing macro data which hinted at a possible recession in the US economy. Traders now await US data & Powell speech for short term profit opportunities.
GBP/USD: The pair is seeing positive activity today following up on gains from the previous session influenced by a fresh wave of Brexit optimism following welcoming response from the EU on PM Boris Johnson’s Brexit proposal. Weaker USD ahead of upcoming payroll data also supported GBP bulls on their gains today. Traders now await US data & Powell speech for short term profit opportunities.
USD/CAD: The pair is trading with dovish bias, but its declines were limited. The pair saw price action consolidate slightly below 1-month lows and is trading range-bound near the 1.330 handle as Canadian Loonie the commodity-linked currency gained momentum on a spike in crude oil price. Weaker USD ahead of Payroll data also added support to CAD bulls. But cautious investor sentiment in the global market kept gains in check preventing a breakout in a price rally. Traders now await the US and Canadian macro data and Powell speech for short term profit opportunities.
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