Hong Kong protest leading to live fire from police and pessimistic comments from US President Trump weigh down market sentiment.
Summary: The global equity market is off to a dovish start for the week on geopolitical cues. While the Asian market opened for the day on a positive note over lingering influence from Friday’s session. The weekend saw President Trump comment that trade talks with China were moving along very nicely, comments from US officials and President Trump stating that there were no plans for rolling back tariffs on Chinese goods contrary to last week’s headlines took the wind out of market bulls.
Further, headlines from Hong Kong stated that renewed escalation of protests and police officials opening live fire completely caused risk appetite from global investors to evaporate, causing major indices and equities to close in red.
Following dovish cues from Asian market, European market opened in red and major indices and equities declined further as Spanish elections were inconclusive and mining stocks decline in European market while Moody’s warnings on Britain’s sovereign debt came as nail to the coffin lid causing major risk assets in European market to decline sharply and retain bearish bias across the day.
In the forex market, dovish influence from geopolitical cues pressured major currencies while USD remained firm on upbeat US T. Yields resulting in major currency pairs trading in red across the day.
Precious Metals: Rare metals market is seeing sharp gains today despite firm USD as demand for safe-haven assets spiked owing to uncertainties surrounding the Sino-U.S. trade deal and renewed escalation in Hong Kong Protest activities.
Crude Oil: Crude Oil prices fell sharply in the international market owing to escalating trade tensions. Following Trump’s comments refuting claims on rollback on Chinese tariffs & renewed Hong Kong protests outlook for demand on crude oil consumption declined weighing down crude oil price.
AUD/USD: The pair is trading range-bound near the 0.685 handle as AUD bulls are weighed down by uncertainties surrounding trade deal uncertainties & renewed Hong Kong protest woes while USD remains firm but lacks strength for creating a breakaway in current price momentum.
On The Lookout: On the macro calendar schedule, North American market hours lack the release of any major update. The week opened with investor sentiment heavily dyed by geopolitical event impact. Traders continue to remain focused on proceedings on the Sino-U.S. trade deal proceedings as conflicting headlines keep traders on the edge.
While speculative bets continue to dominate short term price action, long term bets tend to display a dovish edge as traders retain caution given lack of solid progress and resolution of the dispute between the US and its major trade allies.
On Brexit front, the odds of the UK going through a safe Brexit shot up as the move by Nigel Farage boosted odds in favor of PM Boris Johnson winning the election, which will pave way for EU approved Brexit daft to be passed by UK parliament leading to an orderly Brexit.
Later in the day, in Pacific-Asian market hours, traders will see the release of NAB Business confidence data and NAB Business survey from the Australian economic calendar. On the earnings calendar schedule, Wall Street will see the release of quarterly financial reports from DXC Technology and Hewlett Packard.
Trading Perspective: Forex market is likely to continue to remain dyed in red during North American market hours as broad-based investor sentiment continues to display clear bearish bias over proceedings in geopolitical events. Wall Street will see dovish price action in today’s trading session, given broad-based risk-averse investor sentiment. This is further evident from the activity of US futures trading in the international market, which saw sharp losses ahead of Wall Street opening.
EUR/USD: The pair is trading range-bound, albeit with a positive bias in the global market today as Euro area macro data saw a positive outcome. However, gains were capped on account of the dovish market mood stemming from pessimistic comments from US President Trump. Lack of driving force from USD to pressure the pair further suggests ongoing momentum to hold steady across US market hours.
GBP/USD: The pair is trading with clear positive bias over the latest developments in UK election proceedings. Given positive odds in favor of PM Boris Johnson last week, the latest move by other players supporting Boris Johnson gave GBP bulls fundamental support. However, gains were capped on account of dovish UK macro data. Traders await further headlines on proceedings in the UK market for short term directional cues and profit opportunities.
USD/CAD: The pair is trading flat as neither currency was able to gain an edge over the other to create a dominating bias over price momentum. Developments in trade deal proceedings & Hong Kong protests weighed down crude oil price pressuring CAD while lack of strength from USD bulls to influence a rally kept pair flat awaiting further updates from Washington later today for direction cues and short term profit opportunities.
Please feel free to share your thoughts with us in the comments below.
