Caution on prolonged trade deal delay weighs down investor sentiment. Traders await US PPI data and speech from FOMC members and BOC Poloz for directional cues.
Summary: Global market is seeing major equities and forex pairs decline sharply today as the overall market mood has taken on dovish tone over cues from fading trade deal optimism and disappointing macro data updates. Following dovish closing in Wall Street last night, the Asian market opened on a dovish note and saw major indices and equities continue to crumble as both Chinese and Australian economic data saw worse than expected outcome. Tensions surrounding trade deal proceedings also weighed down risk assets causing the Asian market to close in red.
The European market took cues from the Asian market and opened on a subdued note. Warnings from Germany automaker Daimler ahead of its earnings reports added further pressure on already bearish market tone. But declines were capped to some extent as German GDP data hinted that the country escaped slipping into recession in the third quarter by thin margin remaining above zero, helping improve investor sentiment to some extent. In the forex market, major global currencies continue to see sell-off while USD and safe-haven currencies continued to rise on broad-based safe-haven demand.
Precious Metals: Rare metals saw steady positive price action as demand for safe-haven assets continued to grow despite costly USD over increasing concerns of a slowdown in global economic growth as trade talks continue to remain inconclusive for a prolonged timeframe. But firm USD continues to weigh down gains as costly exchange rate continues to limit fund flow from emerging markets.
Crude Oil: Crude oil price spiked by more than 1% in international benchmarks despite growing concerns for a slowdown in the global economy amid Sino-U.S. trade deal uncertainty as US API weekly crude oil inventory data saw a decline in the stockpile. Further, comments from OPEC on the forecast for lower than expected US Shale production in 2020 also boosted mood as demand to supply ratio slightly improved.
AUD/USD: The pair continued to decline today and scaled fresh one month lows today falling below the 0.6800 handle as AUD bulls were weighed down by disappointing data in China and Australia. Further, broad-based risk-averse trading activity and USD’s rebound on semi-safe haven status and risk currency sell-off also added pressure keeping the pair steady nearly monthly lows.
On The Lookout: While economic calendar update saw Germany escape from falling into recession, data from all major and emerging global economies continue to disappoint greatly increasing the fear of a slowdown in global economic growth. Europe and German GDP data managed to barely stay above 0 – a clear indicator of the impact of US trade war on its trade-dependent economy.
As uncertainties surrounding trade deal continue to grow with each passing day, medium to long term outlook for major risk assets in the financial market shows a dovish inclination. Headlines continue to hint at regular communication between China and U.S.A but so far there hasn’t been any major progress worth providing a medium to long term relief. Traders now await release of US PPI data and US EIA crude oil inventory in early North American market hours and speech from leading FOMC members for short term directional cues.
Later in Pacific-Asian market hours, traders are on the lookout for Singapore’s GDP, Chinese Housing price data and speech from Canadian central bank Governor Poloz for short term directional cues. On the earnings calendar, Wall Street will see the release of quarterly financial reports from Applied Materials, NVIDIA, Viacom B & Wall-Mart.
Trading Perspective: Broad-based dovish outlook stemming from escalating tensions on delayed trade deal proceedings and risk-averse trading activity is likely to keep directional bias of major global currencies remain dovish regardless of short term speculative trading activity. US futures trading in the international market saw a sharp loss on broad-based risk-averse market mood which combined with dovish cues from Asian and European markets suggest Wall Street is set to see another dovish session in today’s market hours.
EUR/USD: The pair continued to decline on broad-based risk currency sell-off and rebound in USD led by yesterday’s positive US CPI data scaling yet another fresh one month low at the 1.0989 handle. Broad-based risk aversion keeps the pair trapped below 1.1000 handle while positive German and EU area GDP data helped keep declines capped below the mid-1.09 handle. Traders now await US PPI data and speech from FOMC members for short term directional bias and profit opportunities.
GBP/USD: The pair declined sharply today falling below mid-1.28 handle as UK retail sales data saw worse than expected outcome. Further, a spike in US Greenback in the global market on broad-based risk aversion also added pressure on GBP bulls causing the currency to lose strength around the major support level of 1.285 handle. Despite opinion poll hinting at the Conservative party’s majority increasing conflicting results in opinion poll is beginning to eat away at GBP’s fundamental strength. Traders now await US PPI data and speech from FOMC members for short term directional bias and profit opportunities.
USD/CAD: The pair continues to gain ground on the upside as broad-based risk currency fuels USD’s strength owing to its status as Pseudo-safe haven currency. However, upside remains capped at five-week highs as a spike in crude oil price increased strength of commodity-linked currency Canadian Loonie. However, the pair still holds steady above mid-1.32 handle while traders wait for US PPI data and speech from FOMC members & BOC Gov Poloz for directional cues and short term profit opportunities.
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