Chinese data helped risk sentiment gain short term boost, but lingering concerns of global recession and escalating multi-front tariff wars keeps scope for long term positive price rally at all-time lows.
Summary: Global equities are enjoying a field day despite major indices and key equities in Asia starting the day on a dovish note. Key risk assets in the Asian market reversed their loss from the early session and traded with upward directional bias as Chinese export data, which came today, was way better than expected. Given its economic sufferings from the impact of the COVID-19 pandemic and US-China trade wars, the latest data was a fresh breath of relief amid increasing worries of a global recession.
This has provided global investors with some hope rekindling risk sentiment allowing short term positive price action. The momentum didn’t just stop in Asian market hours but also carried forward into European markets helping major indices and key equities maintain a minimum of 1% increase compared to the previous session across the trading hours.
Precious Metals: Both Silver and Gold continue to trade positive on their spot and futures market as disappointing data from the U.S.A. continue to underpin safe-haven demand with enough strength to offset influence from Chinese trade data. Spot gold is up more than 0.60%, while silver is up by 1.31% in mid-late European market hours.
Crude Oil: Crude oil price, for now, remains trapped within a short price range limit slightly above previous month lows. While both W.T.I. & Brent futures tanked to multi-year lows in just recent past, cues from lockdown easing measures and renewed supply/production cut agreement has helped crude oil price recover to some extent. But fresh escalations of a trade war between U.S. A & China/E.U. has caused some worry over demand and consumption of oil keeping price trapped below key levels.
D.X.Y.: U.S. Dollar index continues to hold fort above the 100 mark despite improved risk sentiment in the global market. Escalating trade war tensions, disappointing U.S. macro data, and concerns of further growth in U.S. covid-19 victim count as lockdown measures are relaxed keep Greenback fundamentally supported given its status as safe-haven asset allowing it to remain firm against six major global rivals.
On The Lookout: While policymakers in the U.K. have started calling for Q.E. measures, B.O.E. in its latest policy-making decision meeting held off from increasing its program. But it was signaled by new B.O.E. Gov Andrew Bailey that an increase in Q.E. program would be decided in the near future. On the release front, the U.S. calendar sees weekly initial jobless claims, Preliminary Non-Farm Productivity data, and unit labour costs while the Canadian calendar sees the release of IVEY PMI.
Tensions between the U.S. and China and U.S. & E.U. are on the rise, causing worries of a trade war and global economic recession to increase further. The U.S.A. is expected to announce how was China as complied with its end of Phase 1 of trade deal from its ongoing investigations, the result of which is expected to be published before mid-May.
On USA-EU front, E.U. is pushing W.T.O. for levying tariffs on U.S. goods worth 10 Billion dollars over the ongoing spat between Boeing and Airbus unfair government subsidies. Earlier, U.S.A. levied tariffs on E.U. goods worth USD7.5 Billion and raised tariffs on Airbus planes to 15% from 10% charged previously. In retaliation, E.U. is pushing W.T.O. for levying an annual tariff on U.S. goods worth nearly 10 billion stating that U.S. government has failed to comply with rulings on aid for Boeing citing research support from NASA & Pentagon. The ruling for E.U.’s request is expected to come out next month, but tensions of a trade war continue to escalate over arguments between two parties in the meanwhile.
Trading Perspective: Wall Street is expected to open on a positive note given prevalent risk sentiment visible among global investors. Cues from Europe and Asia also show bullish signs led by better than expected Chinese export data. U.S. futures trading in the international market also gained a boost on Chinese data-led cues, but U.S. Wall Street is likely to see low gains as macro data set to release today are expected to show dovish readings.
On the earnings calendar, quarterly financial reports are expected from Cognizant A, Motorola, Microchip, Hilton Worldwide, Viacom C.B.S., Trip Advisor and Fiserv.
EUR/USD: The pair continues to post slow but solid declines as EURO bulls are being pressured on multiple fronts. While the asset purchase program for E.C.B. took a hit from Germany’s court rulings delaying support measures, dovish G.D.P. forecast which came earlier this week added another serious blow. A firm USD adds pressure on top of local factors and escalating tariff war tensions between E.U. & U.S.A., resulting in pair testing an intra-day low of 1.0772 near which price shows some level of consolidation. Traders now await U.S. data for short term profit opportunities.
GBP/USD: The pair made a short bullish burst scaling as high as 1.2417 as B.O.E. initially kept its policy decisions unchanged. This move was further supported by a broad market risk appetite. But B.O.E. Gov Bailey’s comments stating that Q.E. program will increase in the near future came as blow which along with firm USD in the market caused the exchange rate of the pound to fall below 1.23 handle and stabilize around 1.228 level. Traders now await U.S. data for short term profit opportunities.
USD/CAD: The pair remains trapped within a familiar price range loop of 1.4000 to 1.4200 as oscillating in crude oil price action causes high-level volatility. Today’s positive crude oil price albeit lack of solid gains resulted in CAD strengthening its hold over current levels. This caused the exchange rate to consolidate around mid-1.40 handle. But firm strength of USD bulls has resulted in pair aiming to retest 1.41 handle while traders await U.S. data for short term profit opportunities.
Please feel free to share your thoughts with us in the comments below.