Trump and Mnuchin comments on resuming trade talks and UK Supreme Court ruling helped improve investor risk appetite.
Summary: Global stock market today saw major benchmark indices, equities and key risk assets trade positive in Asian and European market hours albeit US Wall Street seeing major benchmark indices and key equities close in red. While news of Chinese representatives cancelling their trips caused the bearish slide yesterday, comments from US President Donald Trump and US Treasury Secretary Steven Mnuchin eased investor woes and helped improve investor sentiment. Mnuchin mentioned that trade talks will resume between representatives of both nations next week and negotiations will take place in two weeks which helped improve risk appetite. Positive cues from Asian markets helped European equities open with a risk on mood while caution ahead of German macro data kept gains in check initially. Mixed German macro data had little impact on price action as gains in bank sector shares and healthcare and F&B sector shares which are considered as indicator of economic activity saw positive price action. Further developments in UK Supreme court ruling which declared UK PM Boris Johnson’s move to suspend parliament as unlawful and easing trade war woes also helped improve investor sentiment resulting in positive price action in European markets. In forex market, Euro continues to suffer while most major forex pairs are trading positive against USD on account of healthy risk appetite in the market today.
Precious Metals: Rare metals market is seeing flat price action today as major investors continued to hold their investment in safe-haven assets awaiting clear directional cues and proceedings in geo-political events. However, lack of fund flow on account of risk on trading activities capped gains in rare metals resulting in directionless, flat price action.
Crude Oil: Crude oil is seeing declining price action in both major international benchmarks as Saudi Arabia boosted its efforts to improve oil output. Further, dovish manufacturing data from Europe and Japan were takes as cues for slowdown in economic activity which is turn is viewed as bad for demand outlook for crude oil consumption resulting in dovish price action today.
AUD/USD: The pair is seeing positive price action today. It got its initial upward boost following comments from Trump/Mnuchin which improved trade talk related sentiment. Further comments from RBA Governor Lowe during his speech today greatly improved risk appetite and underpinned AUD bulls resulting in pair moving above 0.68 handle and trading positive across Asian and European session.
On The Lookout: The immediate price action in market continues to be driven by speculative bets from intra-day traders. As outlook for major geo-political events such as Sino-U.S. trade war and Brexit still lack a clear directional proceeding, traders with huge portfolio and investment capacity have yet to make any major moves. Meanwhile, intra-day traders who use speculative bets to trade based on headlines driven cues continue to dominate trading activity in market recently. Further, escalating tensions in Middle East is yet another reason to worry. For now, headlines indicate trade talks are set to resume next week which leaves proceedings on same dry until then. On Brexit front, UK Supreme court’s ruling stating parliament suspension is unlawful has made traders hope for re-opening UK parliament which could put a dent in UK PM Boris Johnson’s plans for no-deal exit. This has improved investor sentiment to some extent but traders still exercise caution as Saudi officials are yet to appear on air officially to announce retaliatory measures against Iran. For now, all major powers in Europe back United States in its blame on Iran for Saudi Attacks which combined with increased troop deployment cause traders to worry about the possibility of impending war. Traders now await US macro data for short term profit opportunities.
Trading Perspective: Improved risk appetite on account of easing trade war woes following Trump/Mnuchin’s comments helped US stock and index futures trading in international market see positive price action ahead of Wall Street opening. This combined with positive cues from Asian and European market suggests Wall Street is likely to see positive opening today. In Forex market, prevalent risk-on environment suggests major forex pairs are likely to continue positive price action against USD across North American market hours. On Economic Calendar schedule, US calendar will see the release of CB Consumer Confidence data in North American market hours while Pacific-Asian market hours will see release of US API weekly crude oil stockpile and Japanese monetary policy meeting minutes.
EUR/USD: The pair traded in red earlier in the day as it was pressured by yesterday’s disappointing macro data. However, improved risk-on investor sentiment on account of easing trade war woes and mixed German macro data helped EURO bulls gain upper hand resulting in pair moving back above 1.10 handle. Traders now await US macro data for short term profit opportunities.
GBP/USD: The pair was seeing highly fluctuating price action on account of Brexit uncertainties earlier in the day. But gained positive momentum post UK Supreme court’s ruling stating parliament suspension is unlawful which helped improve odds of Brexit extension but gains are likely to be capped as traders lookout for further proceedings. Traders now await US macro data for short term profit opportunities.
USD/CAD: The pair built on its overnight rebound near 1.3260 as Crude oil price declined in the global market. However, the gains were capped earlier in the day on easing trade war woes over comments from Mnuchin and Trump which helped Canadian Loonie gain some headway. But the pair is mostly trading flat and directionless as traders await US macro data for short term profit opportunities.
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