Renewed trade war woes on Trump’s tariff threats with allegations on China failing to meet US agri product import deal and decline in Chinese Yuan caused global market to decline today.
Summary: Post a highly disappointing week, global market has resumed dovish price action as trade war woes continue to escalate with each passing day. Asian market saw major stocks, benchmark indices and risk assets scale new 10 months lows as Chinese Yuan hit a fresh 11 year low over impact of trade war on Chinese economy. Meanwhile, the latest development in trade negotiations with US President Donald Trump blaming China on not meeting agriculture product imports with China refusing Trump’s allegations is keeping tensions in global market fresh and high. The impact is not just visible in Chinese market but also in major markets across the globe. European equities also saw sharp declines in trading session today. Risk aversion influenced by Sino-U.S. trade war woes and impact from mixed PMI updates in European and UK markets also played a major role in European equities decline. In forex market, risk aversion fuelled demand for safe haven currencies, causing high risk currency pairs to trade in red with steep decline.
Precious Metals: Both gold and silver are trading positive despite spike in USD influenced by demand for risk aversion as geo-political woes favor increased demand for traditional safe haven assets. As trade war woes escalate precious metals are seeing huge fund influx pushing gold to scale fresh 6-yr highs in spot market.
Crude Oil: Crude oil price is trading with sharp declines since trading session began for the day. Escalating trade war woes on comments from Trump hinting at more tariffs amid decline in Yuan spelled decrease in demand for crude from world’s largest crude oil importer offsetting positive influence from all directors causing crude to decline by more than 1% on the day.
AUD/USD: The pair saw sharp declines today as risk aversion fuelled by trade war woes, dovish RBA expectations weighed down the Chinese proxy. Further, disappointing Chinese macro data and decline in Chinese Yuan to 11 year lows played a major role in undermining AUD in the global market pushing the pair to 7-month lows near which the pair is trading range bound ahead of US market hours.
On The Lookout: Global market is off to a dovish start for a week which is relatively silent on both geo-political events and macro data updates. US Payroll data last week was a disappointment weighing down US Greenback, further, US President Trump’s threats to impose more tariffs escalated trade war woes causing risk assets to decline while also weakening USD. But prevalent risk aversion in forex market limited USD’s decline. RBA interest rate decision in Pacific-Asian market hours tomorrow remains in focus. Aside from central bank update, trade war woes influenced market sentiment combined with increased odds of no-deal Brexit caused European government bond yields to decline. Meanwhile US government bonds also declined on trade war woes capping Dollar’s potential upward price move. In North American market hours today, US market’s ISM Non Manufacturing Business Activity, ISM Non Manufacturing Employment, Markit Composite and Services PMIs’ remain major focus of investors.
Trading Perspective: Risk Aversion and dovish USD is likely to result in current range bound price action to continue in forex market across American market hours with high dovish tone. On earnings calendar, US Wall Street will see release of financial data from Hewlett Packard, Marriott International, Tyson Foods and WEC Energy. US Wall Street is likely to see muted opening and dovish price action as stock and index futures trading in international market ahead of US market opening saw bearish price action on escalating trade war woes.
EUR/USD: The pair has moved back below 1.12 handle on escalating trade war woes and risk averse investor sentiment. Today’s mixed EU PMI update failed to have visible impact as USD’s weakness from decline in US T.Yields and trade war woes while EU government bond yields decline capped EURO’s profit potential. The pair is trading near 1.1180/85 handle and could scale 1.12 handle in case of dovish US macro data outcome later today.
GBP/USD: Despite hitting multi-week lows on recent past, British Pound has managed to attempt a recovery rally. The pair has now managed to gain stable foothold above mid-1.21 handle and today’s rally is seeing GBP bulls supported by upbeat UK PMI data updates. Broad based USD weakness also adds strength to positive price rally today. The pair is trading at 1.2167 up by 0.11% on the day. Traders await US macro data for short term profit opportunities.
USD/CAD: The pair is trading flat in the global market today. Canadian Loonie which is linked to crude oil is suffering from decline in crude oil price over trade war woes which hint at decrease in demand. Meanwhile, USD weakness from decline in US T.Yields and trade war woes pressure US Dollar in the global market causing the pair to remain neutral today. Traders now await US macro data outcome for short term directional bias.
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