Geo-political events influencing speculative action continue, but prevalent bias favours a decline in all major risk assets and benchmark indices.
Summary: Global equity market is seeing dovish price action today as cues from various key events affect investor risk appetite. Overnight comments from US President Donald Trump stated that he won’t agree to a bad deal with Beijing during his speech at the UN General Assembly in New York yesterday, and China’s jibe back at President Trump made by foreign minister Wang Yi stated that the nation has no intention to play game of thrones on the world stage but expects Trump to respect China’s sovereignty including matters related to Hong Kong. This occurred just ahead of upcoming trade talks between two nations, spiking investor caution.
Further, the move by Democrats in the US House of Representatives in initiating an impeachment inquiry into US President Donald Trump effectively cripples risk appetite in the global market today. This resulted in all major benchmark indices and key equities in Asian markets declining sharply.
Following cues from US Wall Street and Asian markets, European market also saw sharp losses as the trading session began for the day. In European market cues from international market affected price action of tech sector shares which combined with a clouded outlook on global economic activity following latest banter between China and U.S.A has resulted in both forex and equity markets seeing a high level of bearish price action in intra-day trading activity today.
In the forex market, major global currency pairs which are denominated against USD saw a mixed activity as USD initially buckled under pressure from the news of Trump’s impeachment but has since firmed up resulting in gains of major currencies being a cut-off mid rally.
Precious Metals: Rare metals market is seeing flat price action in European market hours. While cautious investor sentiment influenced by trade war woes and impeachment inquiry on Donald Trump initially helped boost demand for safe-haven assets, firmer USD capped demand for precious metals resulting in rare metals trading slightly below recent highs.
Crude Oil: Crude oil price fell for the second consecutive session in the international market as US weekly API crude oil inventory data showed a build in the stockpile. Further, Trump and Wang Yi’s threatening jabs offset optimism built on upcoming trade talks in the recent past. These factors combined with rising tensions in the Middle East crippled Crude oil bulls leading to bearish price action today.
AUD/USD: The pair is trading in red in the international market as AUD bulls suffered from pressure on escalating tensions surrounding trade talks. While news of impeachment inquiry upon President Trump weakened USD temporarily, USD has since firmed up which combined with prevalent risk-off trading activity put a considerable amount of bearish pressure of AUD resulting in dovish price action today.
On The Lookout: Speculative bets continue to act as the main driving force behind global stock and forex market as trading session progress into mid-week. Despite recent banter from both parties involved in trade war – China and USA who employed indirect threatening tactics to make one another submit to their demands as usual, comments from China expressing continued hopes and optimism for reaching some sort of trade deal in upcoming trade talks between both nations provide some level of positive influence to market.
On Brexit front, following the UK Supreme Court’s ruling yesterday, UK parliament suspension has been cancelled and a session of House of Commons was initiated by speaker John Bercow earlier today. This combined with Boris Johnson failing to speak about Brexit during his speech at UN yesterday was viewed by many as a win for opposing MPs who are against a no-deal Exit. However, the odds aren’t completely in favor of opposing party members yet as the UK government must submit some form of a written proposal to the EU before the upcoming summit which is set to occur in the first week of October for the UK to have any sort of chance at exit with a deal with EU.
In the Middle East, despite increasing severity of US sanctions on Iran, the nation refuses to submit to US demands and is using its network with neighbouring nations built during previous instances of economic duress to continue keeping its economy afloat. The nation is currently attempting to trade in petrochemicals and is using backdoor deals and state-run firms built abroad to keep its economy up and running. The highlight among geopolitical events today is the meeting between US President Donald Trump and Japanese Prime Minister Shinzo Abe who are set to meet in New York later today and are expected to come to an agreement on farm and auto tariffs and digital trade.
Trading Perspective: The forex market is likely to remain under pressure in early North American market hours awaiting headlines from the US for directional cues before placing major bets as traders are still cautiously awaiting further details on Trump’s impeachment proceedings. On the release front, the US economic calendar is set to see a release of new home sales data and EIA weekly crude oil inventory data and a speech by FOMC members Brainard, George, Kaplan and ECB’s Coeure. US stock and index futures trading in the international market saw dovish price action ahead of Wall Street opening due to escalating trade talk related tensions and Trump impeachment influenced cautious investor sentiment.
EUR/USD: The pair is trading range-bound near the 1.1000 handle as Euro bulls are pressured by ongoing risk-off trading activity amid caution influenced by geopolitical events. Amid relatively silent macro calendar EURO bulls have nothing major to gain positive influence from while the recovery in USD earlier today further pressured EURO. Traders now await a speech from central bank members for short term trading opportunities.
GBP/USD: The pair is seeing price action fluctuate in a highly volatile manner on mixed Brexit cues. While GBP traded with positive momentum earlier in the day built on yesterday’s Supreme Court ruling and today’s reconvening of UK parliament, the same events turned out to be a huge bearish factor for GBP bulls. Lack of clarity on how events are set to proceed from here on combined with the deadline to submit a deal to EU has put pressure on GBP weighing it down considerably. Traders now await US macro data and headlines for short term trading opportunities.
USD/CAD: The pair is trading with positive momentum in European market hours and displays considerably level of positive bias in favor of USD ahead of Wall Street opening. The bullish price momentums stem from USD’s recovery in the global market following overnight declines influenced by Trump impeachment headlines. Further, dovish price action surrounding crude oil in the international market continues to weigh down commodity-linked currency Canadian Loonie creating bias in favor of further upside move. Traders now await US macro data for short term profit opportunities.
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