Donald Trump

Equities Mixed on Unexpected Cues from Powell & Trump Speech

Donald Trump

Mixed cues from Trump & Steven Mnuchin on trade deal with china and Powell’s confusing speech cause global market to see mixed activity.

Summary: Global equities are trading with slight dovish momentum today on unexpected cues from Fed Chair Jerome Powell’s speech yesterday. Powell in his speech mentioned that Federal Reserve is well insulated from short term political pressures. Given his clear cut stance on rate decision despite pressure from US President Donald Trump, investors sentiment is divided on Fed’s expected rate cut by half in July. However, Powell’s speech saw mixed outcome given the fact that he stated Fed policy makers are still undecided on rate cut decision as they are still not done calculating impact of uncertainties surrounding US tariffs and US conflict with major global allies on US economy which still suggest possibility of rate cut is on the table. European indices opened dovish on fed cues but has since managed to recover early declines and is trading with positive bias slightly above previous session close. Forex market takes a pause on recent bullish momentum as dollar rebound on fed cues.

Precious Metals: Both gold and silver are trading with sharp bearish bias in the global market today as USD rebound post Powell speech. As USD boomed, gold began to decline from six year highs given reduced participation from emerging markets which were major driving force behind recent bull momentum. But prevalent safe haven demand ahead of G20 summit kept declines capped for gold.

Crude Oil: Crude oil price is trading positive with strong fundamental support as US API weekly crude oil stockpile data saw sharp drop in value. Further, Middle East tension and firm demand provide healthy level of positive influence to crude oil bull which acts as fundamental support for today’s positive price action in both major crude oil benchmarks.

AUD/USD: The pair is trading positive today despite USD’s rebound post Powell speech on fresh bidding activity. However, gains remain capped on account of costly USD and caution ahead of upcoming Trump-Xi meeting in G20 summit later this week. Further, investor sentiment also lacks strength on risk averse activity in the global market.

Steven Mnuchin
Steven Mnuchin

On The Lookout: From Fed cues to Trump speech, all events are taking dovish turn causing markets to decline. Powell comments caused probability and expectation for fed rate cut among traders to decline since last night. Further, Trump’s comments in his interview with FOX news stating that he will impose additional substantial tariff on China if trade deal is not reached with Xi Jinping in upcoming G20 summit in Japan also soured the mood. Given Trump’s audacious actions towards its trade allies, especially china, US goods have seen a decline in demand by nearly half as more consumers are rejecting US products while, Chinese goods seem to have some level of demand in US despite tariff hikes. Traders now await US core durable goods order data and EIA crude oil inventory update for short term trading cues.

Trading Perspective: US stock and index futures trade positive in international market amid mixed cues. While Trump’s comments in FOX interview caused increased tensions, comments from Treasury Secretary Steven Mnuchin stating that they are nearly 90% done with trade deal caused US assets to see positive activity in international market hinting at some level of positive momentum in Wall Street today.

EUR/USD: The pair has been on back foot influenced by USD’s rebound on Fed Chair Jerome Powell’s speech yesterday. But downside still remains capped as Powell’s speech saw mixed cues, while Trump’s interview to FOX also weighed on USD. European calendar lacked macro data updates causing USD’s strength to be driving force behind the pair’s rally. Traders now await US data for short term profit cues.

GBP/USD: The pair traded range bound with bulls and bears fighting for control of momentum as Boris Johnson’s comments caused Brexit angst to rise in the market causing GBP to lose upside pressure. While USD rebound on Powell speech, mixed cues in his comments capped USD’s gains. Traders now await US data for short term profit cues.

USD/CAD: While the pair saw some rebound activity from multi-month lows on Fed Powell speech inspired cues, mixed signals from his speech capped USD’s gains preventing USD from regaining control of momentum. Further, positive crude oil price and draw in US API weekly crude oil inventory data also aids CAD on its momentum resulting in pair trading downwards. Traders now await US data for short term profit cues.